India May Scrap 5% Corporate Tax Surcharge

by Lorys Charalambous, Tax-News.com, Cyprus

27 January 2003

The Indian Economic Times reported on Friday that a 5% national security surcharge on corporate taxation is likely to be removed in Finance Minister, Jaswant Singh's next budget.

Without the surcharge, taxes on companies in India will amount to a flat 35%; still 5% above the level recommended by the Kelkar Committee in its tax reform proposals.

Although the Indian government is keen to encourage growth within industry, it now appears increasingly unlikely that a 30% corporate tax rate will become a reality, at least in the short to medium term. This is because maintaining tax holidays granted to companies investing in infrastructure projects such as road construction, was deemed to be a higher priority than further corporate tax reductions.

According to the ET:

'It is...feedback from the industry that apparently clinched the issue. Evidently corporates implementing big projects in infrastructure or in SEZs stand to gain more on account of a full tax holiday rather than a reduced corporate tax of 30%.'

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