Reactions over FM Nirmala Sitharaman’s announcement on cuts in corporate tax rates

Rajiv Singh, CEO, Karvy Stock Broking: “After a large number of minor measure, the government announced a bold and major measure to revive animal spirits. The high corporate tax rate meant that Indian companies were not competitive and this move helps address this and shall also boost FDI. The effective tax rate now stands at 25.17%, and for new companies the effective tax rate will be 17%. The measure is thus a boost for start ups as well. Additionally, the finance minister also announced that there will be no tax on buybacks announced before July and no surcharge on capital gains as well. Reduction of corporate tax has been on the agenda for a while, and this should help in boosting the capex cycle, also it gives companies space to cut prices to boost demand. The corporate tax cut should go a long way in a revival of the economy. The government estimates the fiscal impact to be about 0.7% of GDP, and bond yields have gone up as a result. The measures will benefit the economy with a lag and the boost to the economy as a result of the tax cuts should help offset much of the lower tax rates later in the year and next fiscal year. Among the sectors, I expect Banking, FMCG, consumer durables, and Auto companies will be major beneficiaries. The Manufacturing sector will become attractive with a 15% Corporate Tax rate for new manufacturing companies in India especially in the times when the world is in the phase of trade wars.” Ajay Piramal, Chairman, Piramal Group: “The announcement made by the Finance Minister today is commendable. With this the Government has signalled that it is listening to the Industry and is willing to embrace it as a partner for progress of the Country. We are certain that this Big Bang reform will kickstart the economy. Surplus funds available to companies will be invested in capex and talent. The NBFC sector will save between Rs. 250 - 300 crore that can potentially be redeployed as loans. In a climate of global slowdown, this reform will make India an attractive destination for FIIs and long term investors. The announcement has brought parity to India’s corporate tax rate compared to that of advanced markets thus making it very competitive.” Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE: “The tax announcements made by FM minister is indeed a welcome measure and will definitely boost the Government’s ambitious Make in India program. Once the corporate tax rate of 22% for local companies and new tax rate of 15 % on companies formed after October 2019 comes into effect, investments are likely to surge in the manufacturing sector. The lower tax rates, shows the government’s commitment towards reigniting the economy’s growth engines and augurs well for the broad economy as well as entrepreneurs. Further the boost to the manufacturing ecosystem will not only generate jobs and lead to wealth creation but will also have cascading impact on other sectors including real estate and is likely to push demand for warehousing and commercial real estate space.” Satish Magar, President CREDAI National: “FM’s generous reduction in corporate tax makes India the most competitive investment destination and beckons entrepreneurial activity to reach new highs. The series of announcements by FM are most reassuring as they tell of the Government being sensitive to the economic needs of the people. We are most hopeful that the special needs of housing would soon get addressed to further accelerate the investment cycle.” Ashishkumar Chauhan, MD & CEO, BSE: “Today FM has announced a slew of historic measures including cutting corporate tax rate to a maximum extent possible with effective tax rate going down by almost 33% for existing companies and almost 50% by manufacturing companies starting operations after October 1,2019. With these measures, Indian corporate tax rates have come down to amongst the lowest in the world especially for the new manufacturing companies. These decisions will be celebrated as historic and will go a long way in improving ‘Ease of Doing Business In India’ even further. We, at BSE, welcome these moves and thank the PM and FM for promoting industrialization in India with these measures. There are several other fiscal measures that have also been announced which all point to the government’s commitment to promote the business activities and enhance job creation manifold. These announcements will further boost the investor confidence and start the investment cycle. Removal of surcharge for domestic investors in line with the FPIs, will also go a long way in bringing much needed fresh investment and animal spirit in the India capital markets.” Ajay Singh, Chairman and Managing Director, SpiceJet: "This is a huge step. It will improve sentiment and go a long way in reviving growth, investment and demand. This move, the latest in a series of a steps taken by the government to spur growth, demonstrates the ability of the Finance Minister to come up with big solutions to big problems. The Finance Minister has hit the ball out of the Arun Jaitley stadium!" Gopichand P. Hinduja, Co-Chairman, Hinduja Group: “The current reduction in Corporate Tax by Finance Minister is an excellent step that was needed for Indian economy revival and manufacturing sector. It shows government is well seized of the economic challenges facing all of us. I only wish more such steps, which government is already contemplating, could be taken together in one go like tapping NRI investments, with this one so as to create deeper impact, instill more confidence in economy and amongst Corporates. This would certainly help put businesses back on track, generate more employment and most importantly, keep India as the principal investment destination amidst global slowdown." Rajan Wadhera, SIAM President: “Welcomed the bold announcements made by Finance Minister today, including the reduction of corporate tax rate to 22% and No Minimum Alternate Tax for companies not availing incentives under Income Tax Act. Additionally, the reduction of corporate tax to 15% for new companies making fresh investments from 1st October 2019, will support investment and also FDI in the auto sector. This is expected to give a big boost to Make in India for automobile industry. Expansion of scope of CSR expenditure to include incubation centers and R&D activities will also help with R&D expenditures in automobile sector. All these set of fiscal measures are expected to uplift market sentiments and improve demand for automobiles. These are indeed landmark announcements and would certainly help in reviving growth in the Indian Economy. He truly appreciated the leadership of Finance Minister in making India globally competitive in terms of taxation rates. 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.” Aakash Vaghela, Co-founder and Managing Director, AV Organics: “We congratulate the finance minister for this progressive move. The government’s intent towards the easier tax regime is a step in the right direction. The move will give fillip to the Indian economy ahead of the festive season thereby increasing jobs in the long term. The reduction in corporate tax will give a stimulus to Make in India investments while improving ease of doing business rankings.” T S Kalyanaraman, Chairman and Managing Director, Kalyan Jewellers: “It is very positive to see the government move pragmatically and provide the much needed liquidity boost to the economy. Lower tax rate will increase transparency in the gems and jewellery industry which will ultimately lead to a shift from unorganized to organized sector. We welcome this dynamic decision implemented by the government.” Pradeep Aggarwal, Co-Founder & Chairman, Signature Global and Chairman - ASSOCHAM National Council on Real Estate, Housing and Urban Development: “The announcement made by FM today is really commendable. Corporate tax reduction is a big step for corporate sector. The corporate sector was struggling with various issues since a long time but this remarkable decision has definitely come up as a big relief. For Real Estate Sector the biggest challenge is liquidity crunch and single window clearance which Government needs to look at and with such recent decisions, we are optimistic for it too.” Dhruv Agarwala, Group CEO, Housing.com/Makaan.com/PropTiger.com: “Slowing consumption and falling private investment were both pulling down GDP growth. Today’s announcement to reduce corporate tax rates by almost 10% should help in kickstarting a fresh private investment cycle. Also, providing an additional tax incentive for new manufacturing units will further add to that impetus. This would also encourage new foreign investment in manufacturing in the country because the new tax rates puts removes the disadvantage we had versus our Asian peers. On the flip side, this decision would see the government’s fiscal deficit come under pressure and hence result in lower government spending. However, overall this decision will have a positive impact on the economy because it will provide much needed relief to corporates struggling with slowing consumer demand and will encourage them to once again start thinking about new investments.” Mohit Goel, CEO, Omaxe Ltd.: “We wholeheartedly congratulate the honourable Finance Minister Ms Nirmala Sitharaman for announcing such a bold and decisive measure. This was a long standing demand of the Indian corporates including the real estate sector. We believe the decision will go a long way in reinvigorating the manufacturing sector in particular in line with make in India initiative of the Government. With the new rate announced today, India now becomes a competitive market in the region with corporate tax rate similar to that of ASEAN countries. This should lead to higher investment, thereby growth and higher employment. The real estate industry too stands to benefit from any uptick in the economy.” Dhiraj Jain, Director, Mahagun Group: “By reducing the corporate tax government has been able to strike at the point where the need is. With stocks going up because of the steps taken by the government has benefited the corporate world. We are hopeful that now the government will pay heed to single window clearance, cheaper land parcels and opening up of unused land for real estate development for the growth of real estate sector. We have to understand that the sector plays a huge role in country's GDP and by strengthening it we can achieve the targets set by the government for the overall development of economy and mission housing for all.” Dhiraj Bora, Head Marcom, Paramount Group: “Reduction in corporate taxes by the Honourable Finance Minister will help India become the most competitive investment destination and beckons entrepreneurial activity to reach new highs. The announcements are reassuring as it highlights that the government is sensitive to the economic needs of the people. Now, we are hopeful that the needs of housing would be addressed soon to further accelerate the investment cycle.” Rajoo Goel, Secretary General, Electronic Industries Association of India (ELCINA): “The rate cut in Corporate Tax from 30% to 22% and MAT from 18 to 15% is indeed historic and a major boost to the slumbering economy. It will wake up the sleeping giant. This is a measure the electronics industry which faces zero duties under ITA-1 Agreement of WTO has been pining for. ELCINA appreciates that while existing companies have been given a major relief, the support for new manufacturing companies is even higher with Corporate Tax rate reduced to 15%! This is a good move as it encourages new investments but also would not lead to significant revenue loss as typically new manufacturing companies face a longer gestation periods need a few years to stabilise and start making profits. This step will also attract foreign investors to establish companies and manufacture in India as these rates match the Corporate Tax rates offered by competing countries such as Vietnam and Thailand. With India’s huge market, we should surely be a preferred location for global companies.” Tarun Chugh, National Secretary, Bharatiya Janata Party (BJP): “The new announcements would not only have a positive impact on the slowdown due to global economic scenario but the bonanza announced would cheer the industry and the markets and in turn strengthen the economy. The announcement of reduction in corporate tax was another milestone in the first 100 days of Modi-2 government which would immensely benefit the industry and the trade. The new provision added in the IT Act to encourage ‘Make in India’ was highly investment friendly as it ensures that any Indian company constituted after 1st of October, 2019 with fresh investments would have to pay only 15% Income Tax. This is something historic. The domestic manufacturing companies have been given relief and they would now be charged only 25.17% Corporate Tax. The companies won’t be charged any other tax. Abolition of Surcharge on Capital Gain Tax was another welcome step.”