Industry representative body, the Confederation of Indian Industry (CII) cheers slashing of corporate tax rates and other announcements by the government, finds out
Team B&C

Hailing the finance minister’s decision to cut corporate taxes, the Confederation of Indian Industry (CII) has said that it will lead to revenue buoyancy and higher tax collections and create the spark for igniting economic activity sooner rather than later. CII expects the tax cuts to “truly revive the animal spirits” of the industry.

Vikram Kirloskar, president, CII, said, “The finance minister’s mega corporate tax stimulus is a major move to boost investors sentiments, encourage manufacturing and awaken animal spirits in the economy. Cut in corporate tax from 30 per cent to 22 per cent without exemptions has been a long standing demand of industry and is an unprecedented and bold move by the government.

According to Kirloskar, the finance minister has been receptive and open to suggestions from industry and by taking a consultative approach has further bolstered positive spirits in industry.

“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 spending route to help the recovery process of the economy. Coming just ahead of the festive season, there could not have been better news as the entire country gets ready to celebrate,” he said.

Chandrajit Banerjee, director general, CII, pointed out that, the reduction in corporate tax rate is likely to lower the cost of doing business in India.

CII expects the drastic reduction in corporate taxes to be a huge game-changer for the economy. It will catalyse investments, particularly in manufacturing, infuse huge confidence among investors, and set a new springboard for growth, said CII, revealing that, most of the bold decisions of the government is after taking into account the key made by the body.

CII had also suggested that mandatory CSR provisions should be extended to social business enterprises during its meeting with the finance minister.

“The finance minister has given industry what it asked for by lowering corporate taxes for. he major cut in tax rates places India in a formidable position to capture new growth opportunities and create massive employment. Industry warmly welcomes these decisions and thanks the government for this commendable strategy,” said CII.

The decision to bring down tax rates for new manufacturing companies to 15 per cent would greatly encourage manufacturing in India at a time when global supply chains are shifting, explained CII.
The trade body also expressed satisfaction with the new CSR norm wherein CSR funding (two per cent) of companies is extended to incubators.

CII anticipates the new CSR norm to increase R&D spending by industry which currently stands at just 0.3 per cent of GDP. Further, it will generate industry-academia collaborations for commercialisation of research in science, technology, engineering and medicine related to sustainable development goals,” said CII.
The step to reduce MAT to 15 per cent is being termed as “a notable relief for industry” as the tax had been raised over the years. “Alleviating enhanced surcharge on capital gains including for foreign portfolio investors (FPIs) and grandfathering companies with existing incentives is also a very positive initiative,” believes CII.

On September 20, just prior to holding the 37th GST Council meeting, the Finance minister in the morning slashed corporate tax rates from 30 per cent to 22 per cent for existing domestic companies and to 15 per cent new companies incorporated after October 1 2019.

Post the cut the effective tax rate for existing companies is now 25.17 per cent from 34.9 per cent. Further the finance minister announced decrease in the minimum alternative tax (MAT) from 18.5 per cent to 15 per cent.

The surcharge on capital gains announced in the July 2019 Budget was also removed and the scope of CSR funding extended to incubators financially supported by the central or state governments.

All these significant announcements were made in Goa. The state for the first time hosted a GST Council meeting. Following up with the morning tax cuts the finance minister post the meeting announced GST cuts for the hospitality industry.

CII is termed the corporate tax cuts “landmark decisions” and said that, it counteract the economic slowdown and will ensure revival of market forces.