Corporate Tax Cut Led To Revenue Loss Of Rs 2.28 Lakh Crore In FY20, FY21
The concessional tax regime was introduced in the 2020 Budget to do away with exemptions or deductions in corporate tax.
A total Rs 2.28 lakh crore was lost in tax revenue in the 2019-20 and 2020-21 financial years due to reduction in corporate tax from 30% to 22%, the government told Parliament on Tuesday.
The concessional tax regime was introduced in the 2020 Budget to do away with exemptions or deductions in corporate tax. The tax rate was reduced from 30% to 22% in 2019-20 under Section 115BAA of the Income-tax Act as part of the concessional tax regime.
Replying to a question in the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary said 62% of the reported aggregated total income of all companies has opted for the new concessional tax scheme for 2019-20.
This was also maintained along the same lines in the 2020-21 when 61% of the reported aggregated total income of all companies had opted for the concessional tax scheme, he said.
Based on the above mentioned trends in taxpayer migration and neglecting the impact of non-availability of exemptions under this regime, the Ministry of Finance estimates a revenue loss on account of the corporate tax rate reduction at Rs 1,28,170 crore in 2019-20 and Rs 1,00,241 crore in 2020-21, Chaudhary said.
Chaudhary said there was no proposal to revise the rate of corporate tax to overcome this revenue loss and the growth of corporate tax collection would make up for any loss.
The current year also displays buoyancy in corporate tax collection due to economic growth and new investment as a result of reduction in corporate tax, according to Chaudhary.
In 2021-22, there was a resurgence in corporate tax collection, which shows growth of about 56% as compared to the tax collection of 2020-21, he said.
"It may be noted that the corporate tax collection of FY 2021-22 of Rs 7.12 lakh crore is even higher than the corporate tax collection of FY 2018-19," Chaudhary said.