CBDT roadmap for phasing out tax exemptions - Will Kelkar Committee have the last laugh?
In line with Finance Minister’s statement in his 2015 Budget Speech to reduce the corporate tax rate from 30% to 25% (over 4 years) and simultaneously gradually withdraw tax exemptions, CBDT has proposed that profit linked, investment linked and area based deductions will be phased out for both corporate and non-corporate tax payers and that sunset dates provided in the Act will not be extended. Further, CBDT has also proposed that there will be no weighted deduction benefit with effect from April 1, 2017.
Is the CBDT proposal fair & balanced enough? Has the time finally come to do away with exemptions, that according to the famous Kelkar Committee report (2004), create "unjustifed distortions"? Does the duet of tax rate reduction & phasing out of exemptions meet the Kelkar committee triple test of " equity, efficiency & effectiveness"? Is there some merit when a well known CEO of a big pharma company, Kiran Mazumdar Shaw, says that doing away with weighted deductions will "kill" innovation and deliver a big blow to the ambitious 'Make in India' campaign?