Budget may make some announcements to enable Global Minimum Tax
![Budget may make some announcements to enable Global Minimum Tax Budget may make some announcements to enable Global Minimum Tax](https://www.deccanchronicle.com/h-upload/2024/07/14/1823914-global.webp)
Chennai: The Budget set to be presented this month is expected to make some announcements regarding global minimum tax, which will take effect in 2025. However, it has to be seen whether the minimum effective tax rate will be beneficial for India or not.
The global minimum tax set to take effect in 2025 will have legal and economic ramifications for multinational corporations with an annual global turnover exceeding €750 million. They will be subject to a minimum effective tax rate of 15 per cent in every country they operate.
As per experts, the government is likely to come out with legislative amendments to the Income Tax Act to implement the global minimum tax regime and to levy any top up tax it needs to. This is likely to be a part of the Finance Bill of the full budget.
“India being a signatory of the Global Minimum Tax Agreement and the regime set to take effect in 2025, the government will have to bring some enabling provisions and mechanisms in the Budget. Though the tax has been introduced to counter tax evasion by multinational companies through subsidiaries in tax havens, it has to be seen whether the regime will have any beneficial impact in terms of tax revenues for India,” said Prashant Khatore, partner, Ernst &Young.
India currently has a corporate tax rate of 22 per cent for domestic companies and 15 per cent for new domestic manufacturing companies. The effective tax rate, inclusive of surcharge and cess, for Indian domestic companies comes around 25.17 per cent.
However, India is likely to benefit in terms of investments as the effective tax rate, apart from those in the Special Economic Zones, is above the threshold.
Meanwhile, Indian companies are expecting the extension of the concessional tax rate of 15 per cent for new manufacturing companies beyond march 31, 2024. “In the budget, the government should provide some tax incentive, which would spur job creation. Currently, the threshold for such incentives are kept at Rs 25,000 per month for new employees. Due to this lower threshold, very less number of companies are covered,” said Khatore.