Chennai: 20 September was yet another day of surprise for our economy when Finance Minister Nirmala Sitharaman told that the government has cut corporate tax rate for companies that do not avail of any tax incentive to 22 per cent. Effective corporate tax rate after surcharge will be 25.17 per cent, she said. New manufacturing companies will have to pay an even lower corporate tax rate of 15 per cent.
The tax relief was a part of steps the government hadbeen announcing after consultations with industry to deal with the slowdown, the minister added. Sitharaman said the government was aware of the consequences of the revenue outgo that would happen due to the tax measures announced yesterday, adding that the Centre will lose an estimated Rs 1.45 trillion.
Experts speak
News Today reached out to Chennai-based chattered accountants and financial experts to hear their opinion. “They are trying to boost the market with this move,” said president, Association of Chartered Accountants Chennai, Anil Goel. “To attract foreign investors, they have reduced corporate taxes. But individual taxes for super rich people should also be considered.”
Partner at Grant Thornton India LLP, Sridhar V pointed, “The government is trying to address various pain points and issues in economy. They have reduced interest rate, relaxed FDI, moved towards capitalising and consolidating banks and have larger outlays on infrastructure sector.” He noted that back in 2015, the Government had promised that the corporate tax rates would come down to 25 per cent level in a four year time period. “They have seen this time as an opportunity to bring it down now,” said Sridhar. “These rates compare well with income tax rates in many countries including ASEAN region. This move will encourage more investments and also work for ‘Make In India’ movement and manufacturing sector including the automobile industry.”
Likewise, senior CA, Rajendra Kumar commented that the “government is very much aware of the economic state”. He voiced that the consumption should improve to help the economy. “At this juncture, everyone should work along with the government and not against them as it wont help. These are tough times and the government should instill confidence on industries,” he said.
Rajendra also opined that bringing in large projects were employment generation occurs will boost confidence among people. “It shouldn’t be on paper alone,” he further noted. “They should address concrete proposals of how they are going to implement it.”
Corporate giants
Several corporate leaders and CEOs also voiced their appreciation on the move. Dalmia Bharat Group managing director Puneet Dalmia told media, “The reduction in corporate tax sends a powerful signal that the government is absolutely determined to revive the economy. This will improve the ability of India Inc to make fresh investments, speed up projects, and make a positive impact on job creation.”
Britannia Industries Ltd, managing director, Varun Berry said, “It’s a concrete step to ease the current economic situation.” Panasonic India and South Asia president and CEO Manish Sharma commented, “The announcement to cut corporate tax rates for existing domestic companies to 22 per cent and new manufacturing companies to 15 per cent, is a progressive step that will spur growth.”