Finance Ministry moots road map to end tax exemptions for industry

Preparing the ground for gradual reduction of corporate tax to 25 per cent from 30 per cent, the Finance Ministry on Friday proposed a roadmap for ending various tax exemptions currently enjoyed by industry.

According to proposal of Central Board of Direct Taxes (CBDT), sunset clauses with regards to tax exemptions will be renewed and no weighted deduction will be allowed for any specified business activity from April 1, 2017 onwards.

"The provisions having a sunset date will not be modified to advance the sunset date. Similarly, the sunset dates provided in the Act will not be extended. "In case of tax incentives with no terminal date, a sunset date of March 31, 2017 will be provided either for commencement of the activity or for claim of benefit depending upon the structure of the relevant provisions of the (Income Tax) Act," the CBDT has proposed. The sunset clause date of March 31, 2017 will apply on tax exemptions provided for activities concerning infrastructure, special economic zone, commercial production of natural and mineral oil.

Further, CBDT proposed that "profit linked, investment linked and area based deductions will be phased out for both corporate and non-corporate tax payers". The CBDT has invited comments on the proposal in 15 days.

Finance Minister Arun Jaitley had announced in his last Budget speech that the rate of corporate tax will be reduced from 30 per cent to 25 per cent over the next four years along with corresponding phasing out of exemptions and deductions. This, he had said, was a step towards simplification of tax laws, which is expected to bring about transparency and clarity.