Corporate Tax Cut As Nirmala Sitharaman Announces `1.45 Lakh Crore Stimulus To Reboot India



Finance Minister Nirmala Sitharaman announced a swing of measures on 20th September, 2019 to renew slumped investment in India as well as a cut in corporate taxes. Sitharaman said the annual revenue predetermined on decrease in corporate tax for domestic and other relief measures will be `1.45 lakh crore.

The government has slashed basic corporate tax rate from 30% to 22%, while for new manufacturing companies it has been reduced from 25% to 15%. Over the past few weeks, the government has been announcing a series of measures to enhance growth that had fallen to a six-year low of 5% in June quarter, 2019. On the move’s fiscal deficit impact, Sitharaman said, the effect is being closely monitored.

As Sitharaman made the big announcement, Sensex zoomed over 900 points to 37,042.59, while Nifty rallied 254 points to 10,959.10. Rupee also rallied 66 to 70.68 paisa against the US dollar.

The announcement comes in the midst of demand for rate cut, keeping in mind the revenue position and the need to improve slumped economic growth. The GST (Goods and Services Tax) Council, headed by Sitharaman, held a crucial meeting to decide on tax moderation. There have been demands pouring in from various sectors to cut tax rates in the wake of economic slowdown. The argument propagated has been to boost the consumption and domestic demand by further dropping GST rates.

Mr. Ashwin Reddy, Managing Director, Aparna Enterprises Ltd. said, “The tax reduction announced by the government today is indeed a great move. It will encourage the growth of manufacturing sector, including the building material manufacturing in the country. The additional 10% liquidity created by the move will see existing establishments investing further into the business. Further, the lowering of taxes for new manufacturing companies to 15% will not only see building materials manufacturers expanding their manufacturing capabilities, it will also create more opportunities for the segment. The reduced tax rate for new companies will witness manufacturing players across sectors investing in civil infrastructure development, which in turn will lead to an increasing demand for building materials.”