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Reduction In Corporate Tax Will Strengthen India's Position Among Competitive Economies In The Manufacturing Sector: PHD Chamber

Capital Market 

Significant cut in corporate tax for domestic firms will accelerate the investments in manufacturing, open up new employment opportunities and kick start economic growth trajectory of the country, said the industry body PHD Chamber of Commerce and Industry in a press statement issued here today. PHD Chamber congratulates the Hon'ble Finance Minister Mrs Nirmala Sitharaman on a great breakthrough in the economic reforms which will not only boost the business sentiments but also go a long way to strengthen India's journey towards a US$5 trillion economy by 2024-25 and US$10 trillion economy by 2030.

A reduction in the Corporate Tax will strengthen India's position among the competitive economies in the manufacturing sector such as China, United States, Germany, Japan, South Korea, Mexico and Canada, among others, said Mr Rajeev Talwar, President, PHD Chamber of Commerce and Industry.

The slew of reform measures including an option to pay income-tax at the rate of 22% subject to not availing any exemption/incentives other than MAT and an option to pay income-tax at the rate of 15% on making fresh investments in manufacturing after 1st October 2019 will attract large chunk of domestic and foreign investments and strengthen Make in India initiative of the Government, said Mr Talwar.

The firms which are liable to pay income tax at the rate of 22% will witness an effective tax rate of 25.17% and the effective tax rate for companies making fresh investments on or after 1st October 2019 will be 17.01% which are significantly lower as compared with the previous regime of more than 30%.

Significant reduction in the corporate tax will increase the price-cost margins of the business firms, boost the sentiments for more production, enhance the production possibility frontiers of the country and create millions of new employment opportunities for the growing young population, he said.

With the increased attraction for foreign investors, India is expected to become a US$100 billion Foreign Direct Investments destination (every year) in the next few years, said Mr Rajeev Talwar. The scope of mandatory 2% CSR spending has been expanded to include funding of incubators of Central and State Government. This will go a long way in strengthening the university-industry linkages in research and fortify research ecosystem in the country, said Mr Talwar. Going ahead, the maximum personal income tax rate should move towards 25% to increase the personal disposable income which will boost consumption demand in the economy, said Mr Talwar.

We expect a significant 100 bps cut in the repo rate in the forthcoming review of Credit Policy by Reserve Bank of India on 4th October 2019 to reduce the cost of capital and to give a further push to the economic reforms trajectory of the nation, said Mr Rajeev Talwar.

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First Published: Fri, September 20 2019. 16:54 IST