In a major boost to employment and economic activity, the government on Friday slashed corporate tax rate for domestic companies to 25.17 per cent inclusive of all cess and surcharges for domestic companies, a move that was largely welcomed by India Inc as the gloom of an economic downturn looms large.
“Tax concessions will bring investments in Make in India, boost employment and economic activity, leading to more revenue,” said Finance Minister Nirmala Sitharaman. These boosters for the India Inc have been announced at a time when the confidence in the Indian economy has given way to uncertainty.
The Governor of Reserve Bank of India, Shaktikanta Das, on Friday welcomed the Finance Ministry’s decision to slash effective corporate tax to 25.17 per cent inclusive of all cess and surcharges for domestic firms and said the measures taken by the government will “help revive the economy”.
While speaking at the India Today Conclave in this regard, Das said, “This is a bold and welcome decision. During Arun Jaitley’s tenure as FM (Finance Minister), the corporate tax was reduced from 30 to 25 per cent. This was one of the hurdles, and the measures will help revive the economy."
Sitharaman also announced a reduction in the minimum alternate tax (MAT) rate for businesses availing tax breaks to 15% from 18.5%. The government also rolled back an increase in surcharge introduced in the July budget on capital gains made by individuals and other entities from the sale of equity.
Sitharaman told reporters here that an Ordinance has been passed earlier in the day giving immediate effect to the amendments to the Income Tax Act. The government will lose an estimated ₹1, 45,000 crore because of the liberal tax schemes.
The finance minister’s big bang announcements were met with positive reactions by businessmen and industrialists, who see the measures as a hope to overturn fortunes and revive the pruning economy. “This is not bigger than the budget, this is bigger than at least 20 budgets,” said Samir Arora of Helios Capital.
Kotak Mahindra Bank CEO Uday Kotak in a tweet said, “Reducing corporate tax rate to 25% is big bang reform. Allows Indian companies to compete with lower tax jurisdictions like the U.S. It signals that our government is committed to economic growth and supports legitimate tax abiding companies. A bold, progressive step forward.”
Titan CFO, S Subramaninan told CNBC-TV18 that he, too, considers the move announced by the government as extremely positive, “This can be called an early Diwali.”
“The cut in tax will go to the earnings straight away and we will be able to save 4% by rate cuts. Today’s big move will also boost earnings”, he said.
Bicon chairman, Kiran Mazumdar Shaw said that the measures announced by the government today are “most wanted and most required” – one that will bring back investor sentiment.
FM’s announcements today will give necessary fillip to the economy which we’ve been hoping for, said Union minister Piyush Goyal, adding that the measures will help companies like Coal India, Infosys and Wipro.
Union Home Minister Amit Shah, too, chimed in the chorus and said that rationalisation of corporate tax had been a long pending demand, which is now a reality. “This move will make our corporates globally competitive and our markets much more exciting for potential investors,” he wrote in a tweet.