Pre-budget memorandum for union budget 2012-13

Industry 3048 views 9 replies

Sourav Banerjee MA,MSW

Shabda Bramha

8842 Points Joined July 2011

Pre-budget Memorandum for Union Budget 2012-13

Regarding Corporate Social Responsibility (CSR) by companies, the Institute of Company Secretaries of India (ICSI), in its Corporate Taxation – Pre-Budget Memorandum for Union Budget 2012-13, has suggested that :

“Corporate sector needs encouragement to progressively integrate the activities on the social front for the development of the society, with the business purpose and business plan of the company.”, and has suggested that “It is suggested that a new section may be introduced in the Income Tax Act to recognize the expenditure which is incurred by a company and which is certified by a Practicing Company Secretary (after conducting CSR audit) as expenditure incurred for discharging the corporate responsibility towards the society. Companies Bill, 2011 contains a provision which requires specified category of companies to incur a prescribed percentage of their profit on CSR Activities during the financial year. Therefore, now a need arises to encourage companies towards CSR, by allowing them a weighted deduction of 150% of the amount expanded on CSR activities”

As regards the Corporate Tax Rate, the apex Institute suggests “The surcharge and cess on corporate tax may be abolished. Further, corporate tax rate may be brought down to 25% and tax rate applicable to foreign companies may also be relooked to provide level playing field and to facilitate better tax compliance and bring down cost of doing business in India.”

The following scrennshot has been taken from 29-pages long document published by the ICSI. Original document is attached herewith. Please find.

Members are requested to kindly share their views regarding the Memorandum.

Regards,

Sourav Banerjee

Attached File : 601709 897060 pre budget1 memorandum icsi.pdf downloaded: 300 times

Replies (9)

Rahul Bansal

Finalist

35929 Points Joined September 2009

right information at the right time.........thanks a lot :) Happy New year to yoo too :)

Sanket

!..Live to Give..!

16427 Points Joined December 2010

1. INCOME TAX

(A) Corporate Taxation

i) Deduction for expenditure on Corporate Social Responsibility (CSR)

Corporate sector needs encouragement to progressively integrate the activities on the social front for the development of the society, with the business purpose and business plan of the company.

ii) Corporate Tax Rate

Corporate tax rate of 30% plus surcharge of 5% plus cess of 3%, results in effective tax rate of 32.45 per cent for domestic companies and tax rate of 40% plus surcharge of 2% plus cess of 3%, results in effective tax rate of 42.024 for foreign companies which is significantly higher than in other developing / developed countries.

In addition to this, dividend distribution tax and lowered depreciation rates impose a further strain on companies leading to increased outgo towards income taxes thus leaving inadequate funds for generation of internal resources for ploughing back for expansion, modernization, technology up-gradation, R&D etc.

Considering the current economic challenges, Indian economy needs infusion of foreign capital in the form of FDI and FII inflows. Huge capital is required for the crucial infrastructure building in railways, airports, ports, roads and power generation etc.

iii) Minimum Alternate Tax (MAT) Rate

The Finance Act, 2011 increased the rate under MAT provisions from 18 per cent to 18.5 per cent. The rate of 18.5% is high as it adversely affects the MAT paying companies particularly the infrastructure companies.

iv) Dividend Distribution Tax (DDT):

Finance Act 2008 amended the provisions of Section 115-O of the Income-tax Act, 1961 (the Act), to mitigate the cascading effect of DDT in a single tier structure, by inserting sub-section (1A) which reads as follows:

“1A: The amount referred to in sub-section (1) shall be reduced by:

(i) The amount of the dividend, if any, received by the domestic company, during the Financial Year, if:

(a) Such dividend is received from its subsidiary;

(b) The subsidiary has paid tax under this section on such dividend; and (c) The domestic company is not the subsidiary of any other company”

The amendment to section 115-O mitigates the cascading effect of taxation of dividend, only upto one level. However, cascading effect of DDT still continues to be felt in case of second level and the further step-down subsidiaries. Deletion of clause (c) of the newly inserted subsection (1A) will extend the benefit to a muti-tier structure and hence multiple incidence of DDT on up-flow of dividend from subsidiary company to holding company can be prevented in all cases.

v) Depreciation

The rate of depreciation for general machinery and plant has been reduced from 25% to 15%, along with the enhancement of initial depreciation rate from 15% to 20%. The increase in the initial depreciation has not gone far enough to neutralize the impact of decrease in normal depreciation.

CA Pallav Singhania

IT System Auditor

33683 Points Joined April 2010

Thanks again SouraV da!! For the Updates...as usual!!!!!

Naresh

365 Points Joined July 2011

Very useful information...thank you and yes ~Happy New year~

Sanket

!..Live to Give..!

16427 Points Joined December 2010

CENTRAL SALES TAX

(A) Rate of Central Sales Tax

Central Sales Tax rate of 2 per cent is effective from 1^stJune, 2008. The rate was expected to be reduced to 1 per cent w.e.f. 1^stApril, 2009 and to Nil on 1.4.2010 on implementation of Goods and Services Tax. However, the CST rate continues to be 2 per cent.

(B) Include Natural Gas/Liquefied Natural gas under declared goods

Natural gas is a primary energy source and has emerged as the most preferred fuel due to its inherent environmentally benign nature and greater efficiency. Its importance in the primary energy basket is likely to increase due to increased availability in times to come, which besides meeting energy need would also significantly reduce greenhouse gas emission.

Sanket

!..Live to Give..!

16427 Points Joined December 2010

OTHERS

(A) CESTAT benches are not sufficient to dispose of the pending cases:

For the Appellants in an around Hyderabad, Ahmedabad, Kanpur and Pune and cost of defending demands is becoming prohibitive due to unaffordable fees at existing cities where the Benches are located and even cost of travel and stay further makes it costlier. Constitution of Bench at Hyderabad, Ahmedabad, Kanpur and Pune will help to develop trade and industry and other stakeholders immensely. With decentralization, pendency at different Benches and the cost of litigation will come down (Annexure G).

(B) KAR VIVAD SAMADHAN SCHEME 2012 (KVSS)

In view of the huge pendency of disputes at different levels, and considering the pressure on the adjudicating authorities and appellate authorities, High Courts and Supreme Courts an attractive Dispute Settlement Scheme be introduced on the line of KVSS 1998 which will result into WIN-WIN situation for the Government and the Assessees (Custom, Central Excise and Service Tax ) be introduced (Annexure H).