The Confederation of Indian Industry (CII) urged the government on Monday to cut the corporate tax rate to 25% from the current range above 30% when its budget for the year ending March 31, 2020, is presented next month.
It also called on the administration of Prime Minister Narendra Modi, who is just starting his second term after a landslide election victory, to introduce other tax incentives to boost India's sagging economy.
Economic growth slipped to 5.8 per cent, its lowest rate for more than four years, in the January-March quarter, adding to pressures for fiscal stimulus from the government and a rate cut by the central bank.
In 2015, the government had promised to cut corporate tax rates and roll back tax exemptions over a period of four years, but only small companies obtained tax relief.
Industrialists said other major economies, including the United States and several Asian countries, have reduced their corporate tax rates to a 16-25% range. They argue that by comparison, India's rates - which run from 32-35 per cent depending on the size of a company's sales - damage the competitiveness of Indian firms.
A Finance Ministry spokesman declined to comment on the industry group's appeal, saying budget decisions were not public yet.
New Finance Minister Nirmala Sitharaman, who will present her first budget on July 5, is under pressure to announce tax incentives for individual taxpayers and corporations to boost consumer demand and investments.
Finance ministry officials have, however, cautioned against any large-scale stimulus, citing fiscal constraints due to slower growth in tax receipts.
"The first 100 days of the new government would be an opportunity to set the direction and pace of a reform agenda for the country over the next five years," CII President Vikram Kirloskar said after presenting its wishlist to the government.
The CII called on Modi to push reforms in the budget so as to boost private investment and domestic consumer demand and achieve 8-10% economic growth rates over the next few years.
The CII represents more than 9,000 medium- to large-sized companies and about 300 regional chambers representing about 300,000 small businesses.
Uday Kotak, president-designate of the CII and head of Kotak Mahindra Bank, said the industry was facing challenges of high borrowing costs and hefty tax rates.
The government could improve the competitiveness of the economy by advancing various reforms, including lowering tax rates, privatising state-run companies and banks, while still containing the fiscal deficit, he said.
There needed to be stimulus either at fiscal or monetary level, or both, so that economic growth could be kick-started, he said. The industry expects the central bank to cut interest rates by at least 25 basis points at a meeting on Thursday, he added.