Nirmala Sitharaman Press Conference: Government Slashes Taxes For India Inc. In Unexpected Move
Finance Minister Nirmala Sitharaman today proposed to cut corporate tax rates for domestic companies to 22 percent and new domestic manufacturing companies to 15 percent.
Here are the key highlights from her press conference in Goa, ahead of the GST Council meeting:
- Effective tax rate for companies will be 25.17 percent, inclusive of all surcharges and cesses.
- Domestic firms will have the option to pay income tax at 22 percent if they don’t avail any exemptions, incentives.
- The corporate tax cut, aimed at spurring growth, will be implemented through an ordinance.
- Domestic companies will not have to pay minimum alternate tax.
- No tax surcharge on capital gains on sale of securities, including derivatives in the hands of foreign portfolio investors.
- No tax on listed companies’ share buybacks announced before July 5, 2019.
Watch BloombergQuint’s Detailed Coverage On Today’s Corporate Tax Cut
Negative For Bond Markets, Says Kotak Institutional Equities
It will negatively impact the bond market as revenue forgone due to corporate tax cut will make it difficult to stick to fiscal targets.Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities
India's Tax Rates Now More Competitive Than Global Peers, Says Deven Choksey
The cut in tax rate announced by the Finance Minister is more pragmatic and it could lead to more foreign investors or industries to come in the Indian market. Tax rates in India have now become more competitive with global peers. This could compel foreign investors to invest more in India.Deven Choksey, Founder, KRChoksey Group
Maruti Suzuki India’s RC Bhargava On Measures
Today’s measures will enable India Inc. to either reduce prices or make new capital investments, said the chairman of India’s largest automaker.
“New investors who are coming in have to pay a lower tax rate. That’s something that has never existed,” he told BloombergQuint.
Expect Markets To Sustain And Inch Higher, Chakri Lokpriya Says
Indian equities are expected to sustain and inch higher on the back of the latest announcements by Finance Minister Nirmala Sitharaman, according to Chakri Lokpriya managing director and chief investment officer at TCG Advisory Services.
The government has taken a meaningful stake by reducing the tax rate, which will allow many companies to undertake certain capital expenditure plans. With the corporate tax rate going down, consumer facing companies will also benefit, Lokpriya told BloombergQuint.
“Lower tax rate will allow manufacturing and financial service sector companies to proceed with capex plans and credit growth,” he said.
Lower Tax Rate To Boost Investment Return, Says Titan CFO
Subbu Subramaniam, chief financial officer of Titan Company Ltd., welcomed the announcements, saying lower tax rates will make investment returns much higher.
“People who start manufacturing companies after Oct. 1 will have an even lower tax rate,” he said. “This is a great incentive for manufacturing, great to get new jobs. This is a great move.”
The company’s effective tax rate—currently at 29 percent—will fall to 25 percent, Subramaniam said. “This also gives us freedom to do business the way we want, in terms of where we want to put up factories and so forth.”