Budget 2016: How good is the budget for the corporate sector?

Live Mint

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The government retained the fiscal deficit target for FY17 at 3.5% of the gross domestic product (GDP) in Budget 2016-17. This followed the Reserve Bank of India’s statement that it expects the government to stay on the path of fiscal consolidation.

The finance minister had in the last budget indicated that he will phase out tax preferences for the corporate sector, and reduce the rate of tax to 25% in the next three years. The plan was never executed, and no action has been taken this time either. Tax exemptions are costing the exchequer `2 trillion at present.

There have been steady demands to remove the various surcharges from corporate tax, which is currently at 34%, including surcharges. The Budget announced that new manufacturing companies incorporated after March 2016 will be given the option of being taxed at 25% plus cess and surcharges.

The budget focused on restoring tax exemptions for SEZs (Special Economic Zones) by taking away minimum alternate tax (MAT). The Budget 2016 also allowed 100% tax exemption to start-ups for three years, except MAT, which will apply from April 2016 to April 2019 for creation of jobs.

Small and medium enterprises (SMEs) are the backbone of the job market, employing 40% of the country’s workforce, almost 8 crore persons, and contributing 17% to India’s GDP. Mudra, another of the government’s schemes to provide loans at concessional rates to small entrepreneurs, got a good response, as the target of disbursement under Mudra scheme has been increased to `1.8 trillion.