Compliance to make good lost revenue, says FM

She has also not considered going for foreign currencydenominated borrowings.

The government has budgeted for ~7.1 trillion as gross borrowing in this fiscal year. Of this, ~4.4 trillion, or about 62 per cent of the total, is being borrowed in the first half.

Gross borrowings are almost equal to the Centre’s fiscal deficit in absolute terms. In proportion to GDP, the fiscal deficit is pegged at 3.3 per cent for FY20. The deficit has touched almost 78 per cent of the Budget Estimates in just four months of the year. Even before the cuts, direct taxes grew at a muted 5 per cent till about the middle of September, increasing the required growth rate to 27 per cent in the remaining part of the year from around 17 per cent assessed in the budgetary estimates. GST collection has remained placid till August with the mop-up in two months being less than ~1 trillion each and none of the months reporting ~1.17 trillion, which was the target.

Recalling that she made a decision to go for tax cuts in two days, the minister said the rates were low compared to Southeast Asia’s. If any assessment had been made as to how much investment would flow into India following these announcements, she said the rough number could come only by November.

However, if Apple shifts to India with its entire eco-system, it would be a signal for foreign companies to set up shop here, she said. Apple has been demanding various sorts of tax concessions to start manufacturing in India. Now the low corporate tax structure has come

for all new manufacturing facilities, she said. To a query that there are still procedural issues coming in the way of companies coming in India, she disclosed that foreign investors had told her that the biggest obstacle was that taxes were too high in India.

“The top consideration on which India was rejected as an investment destination is now better than everybody else ... For someone who is coming up with new investment, no country is offering 15 per cent (tax rate). We are giving 15 per cent with no MAT (minimum alternate tax) and simpler taxation structure,”

she said. India has now become an attractive destination for companies to relocate supply chains from China, the finance minister said.

Quoting experts, she said India was much better than China in terms of rates, transparency, and tax administration.

“Apple and its entire ecosystem’s moving will have a greater impact. Everyone who comes now will straightaway get 15 per cent tax benefit. Component manufacturers of Apple in China will find India more attractive to have units at 15 per cent in India,” she said. Also, there is no sunset clause on these announcements, which has removed any uncertainty in the minds of investors. “The decision was absolutely simple and clear-cut. It leaves out any scope for interpretation,” she said.

She said once the decision had been taken, it would be difficult for anyone to raise the corporation tax rates. “Anyone doing this will have to go to Parliament and explain the rationale for doing so,” she said.

Sitharaman said the decision was taken after industry and experts questioned her about structural reforms following her announcements on sectoral packages. “First, we made sectoral announcements, beginning August 23, almost a week after the prime minister's Independence Day speech. But, then industry asked us where the structural reforms were,” she recalled.

The same demand came up when Sitharaman visited various places in the country for understanding tax issues on the ground. The finance minister on Friday announced a corporation tax rate cut to 22 per cent from the current 30 per cent for firms not availing of exemptions. This comes to 25.17 per cent after surcharges and cess from 34.94 per cent at present. When asked how the figure of 22 per cent was arrived at, Sitharaman said she wanted to bring the overall incidence to 25 per cent.

To a query, she said she had not applied her mind to personal income taxes and just glanced through the report submitted by a panel on the direct tax laws.”

Sitharaman did not agree that the cuts were just supplyside measures, since increase in corporate tax profits would also lead to more dividend in the hands of investors and increase in consumption.

She said delay in the approval of the Ordinance on the corporation tax cuts by President Ram Nath Kovind had her and her team worried.

The press conference had been scheduled for 10 am in Panaji. However, the approval came a bit late and the conference started at around 10.30 am.