Reduction in corporate tax rates, expert says move to arrest slowdown
Govt slashed the income tax rate for companies by almost 10 percentage points to 25.17 per cent.
New Delhi: Dubbing the government's move of slashing income tax rate for companies as a "surgical strike" on negative sentiments in the economy, markets analysts said the step will ease liquidity concerns of India Inc and boost investment.
The reactions came as the government on Friday slashed the income tax rate for companies by almost 10 percentage points to 25.17 per cent and offered a lower rate to 17.01 per cent for new manufacturing firms to boost economic growth rate from a six-year low by incentivising investments to help create jobs.
"This is yet another surgical strike on bears and negative sentiments in the economy which will create an environment of surplus in the hands of corporates for making further investments and ease their liquidity concerns.
Jatin Dalal, Chief Financial Officer, Wipro Limited says, “The government has taken a giant leap in tax reforms. It's a huge boost to corporates and will enhance India's position as a competitive destination for fresh foreign investments. ‘Make in India’ now gets a fresh impetus with reduced rates of corporate income tax. MAT rate reduction is also a bold move. Clarification on grandfathering of buyback tax on inflight buyback programs as of July 5 2019 is a comforting outcome. This would go a long way in restoring confidence in the market and nudge companies to make fresh investments.”
Vinod Ramnani, Non-Executive Director of Opto Circuits said, Speaking on the Govt’s announcement, Mr. Vinod Ramnani, Non-Executive Director of Opto Circuits, said “The announcement of reduction in corporate tax rate is a bold move by the Government. This was much needed by the economy to boost consumption and investment cycle. The overall sentiment of the market and corporate should lift and the economy should start showing some signs of recovery.”
He further added that, “the liquidity situation should also improve after Government’s directives to PSU Banks and NBFCs to increase credit flow to corporates.”
Commenting on the Government’s announcement, Mr. Santosh Joshi, Founder & CEO of BankEdge, said “We welcome the government’s bold announcement of reduction in effective tax rate to about 25 per cent for all companies. Moreover, lower base tax rate of 15 per cent for new companies formed after Oct 1 is also a big positive step for getting the economy back on track. These steps will allow manufacturing and financial services sector companies to proceed with capex plans and credit growth. Profitability for companies will increase with lower taxes and would enable them eventually to make new capital investments.
“The overall improvement in sentiments and market liquidity to open the doors for more employment in banks and manufacturing companies. We believe that, we as a Banking & Finance Academy would benefit greatly with these announcements in the coming period.” Santosh Joshi, Founder & CEO of BankEdge added.
Madhu Sudhan Bhageria, Chairman and Managing Director, Filatex India Ltd said, Speaking on the Govt’s announcement, Mr. Madhu Sudhan Bhageria, Chairman of Filatex India, said “We welcome the announcement of reduction in effective corporate tax rate to about 25 per cent as this would directly lead to big jump in profitability for manufacturing companies like us. Moreover, the lower base tax rate of 15 per cent for new companies formed after Oct 1 is a again a great bold move to boost capital investments in private sector. These measures were much needed by the economy in terms of lifting private investments, consumption and overall sentiments.”
He further said, “The reduction in taxes would ensure hundreds of billions of dollars in FDI and FII flows over the medium term. We are very happy that this would also enable to picking up the domestic demand for textile industry and thus consumption of our products like polyester yarns.”
Vijay Mansukhani, MD, Mirc Electronics says, Speaking on the Govt’s announcement, Mr. Vijay Mansukhani, Managing Director of MIRC Electronics, said “The announcement of reduction in corporate tax rate is really a big positive move as this will enable manufacturing companies to make new capital investments. This will increase the profit margins and capital investments across the sectors Base tax rate of 15 per cent for new companies formed after Oct 1 is a big bold announcement steps to boost investments.”
He further said, “The overall demand scenario would improve across sectors as the Government has directed public sector Banks and NBFCs to increase retail credit, the consumer spending during this festive season should increase, which should have good positive impact on consumer durables like LED Televisions, Air Conditioners and Washing Machines.”
Kewal Chand Jain, Chairman of Kewal Kiran Clothing, says Speaking on the Govt’s announcement, Mr. Kewal Chand Jain, Chairman of Kewal Kiran Clothing, said that, “We welcome the announcement as the lowering of corporate tax rate would mean higher profitability and higher return on investments. This is really great move for across all sectors, as it would help in boosting private investments, consumption and overall sentiments. It’s an unique way to welcome Diwali by Government of India.
He further said “As the announcement is a bold step with the perspective of pick-up in consumption and investments scenario, the demand for overall consumption would also see a positive growth in the coming period,” Kewal Chand Jain, Chairman of Kewal Kiran Clothing.
Dayanand Agarwal, Managing Director of Agarwal Packers & Movers, DRS Group said, Speaking on the Govt’s announcement, Mr. Dayanand Agarwal, Managing Director of Agarwal Packers & Movers, DRS Group, said “This is fantastic move by the government in terms of providing much needed stimulus to economy. Reduction in effective corporate tax rate to about 25 per cent means direct benefit in profitability for companies. The further lower base tax rate of 15 per cent for new companies formed after Oct 1 is also a big positive step to boost investments. These measures would spur growth for companies and would enable them to make new capital investments.”
“Private Capex cycle would get a real boost after the improvement in system’s liquidity. We believe that the overall logistics industry would see a huge positive growth in the coming period.”