Cut in corporate tax to boost investors sentiments, manufacturing, says industry players

Industry players have said the Finance Minister Nirmala Sitharaman's announcement to cut the effective corporate tax to 25.17% from 30% will boost investors sentiments, encourage manufacturing and awaken animal spirits in the economy.

They further said that the change in the government's mindset from revenue orientation to production orientation is a welcome move and these tax measures will help India become a globally competitive market to attract more foreign investment.

Confederation of Indian Industry (CII) President Vikram Kirloskar, said the reduction in corporate tax from 30% to 22% without exemptions has been a long-standing demand of industry and is an unprecedented and bold move by the Government.

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''The government is on a fearless track to ensure that India becomes as competitive on tax rates with the rest of the world. This also indicates that the government is adopting a tax stimulus route rather than using increasing government spending route to help the recovery process of the economy,'' he added.

Federation of Indian Chamber of Commerce and Industry President Sandip Somany said the tax reliefs will certainly prove to be a much-needed booster dose in tackling the current slowdown & regaining the growth momentum. Lowering of income tax on corporates is longstanding.

The Society of Indian Automobile Manufacturers President Rajan Wadhera said the set of fiscal measures are expected to uplift market sentiments and improve demand for automobiles. ''These set of major tax reforms are a clear indicator of the Government of India’s commitment to improving business environment to give a definite boost to economic growth,'' he opined.

Grant Thornton India LLP Partner, Vikas Vasal said the government has addressed the key demand of businesses to align India’s corporate tax rate with the current economic reality where most large economies like the USA and the UK have taken similar measures to attract capital and investments.

''Hopefully, this should be followed by a similar tax rate reduction for individuals and other taxpayers soon as the festive season approaches. This would leave more money in the hands of the taxpayers, which in turn would boost overall demand and consumption in the economy,” he noted.

According to Deloitte India Partner Rajesh H Gandhi, tax rates for new manufacturing companies has been reduced from 29% to 17%.

''This will provide significant impetus to the manufacturing sector especially if you consider the opportunity arising out of the US-China trade conflict. The corporate tax rate now is even lower than China’s rate of 25% which comes down only for certain preferred sectors. Also, the clarification that all capital gains earned by FPIs will be exempted from the higher surcharge will benefit debt funds,'' he said.

Knight Frank India CMD, Shishir Baijal observed that these measures will complement the monetary policy measures taken by the RBI in increasing liquidity and consumer spending.

''As a trickle-down effect of this, we should be hoping for a revival for the real estate sector as well. This boost will certainly accelerate demand for commercial spaces, but we understand that the financial stability expected will propel growth for the beleaguered residential market in the near future,'' he said.