Home Economy Corporation Tax cut: Modi Government’s big surprise before Diwali

Corporation Tax cut: Modi Government’s big surprise before Diwali

Corporation Tax Cut: Modi Government’s big surprise before Diwali
Corporation Tax Cut: Modi Government’s big surprise before Diwali

At the GST Council Meeting in Goa, Union Finance Minister Nirmala Sitharaman slashed corporate tax for domestic companies and new local manufacturing companies.

Finance Minister Nirmala Sitharaman’s announcement to cut corporate tax rates on 20th September was a welcome surprise for the Indian economy that has been struggling since long. According to reports, the government has cut the corporate tax rate to 22 per cent (inclusive of all cesses and surcharges) for domestic companies from the existing 30 per cent. Even new domestic manufacturing companies, incorporated after October 1, will pay only as little as 15 per cent rate provided they start manufacturing by 2023

Prime Minister Narendra Modi stated that the decision will attract private investment from multinational companies and result in employment generation. Terming the decision as ‘historic’, the Prime Minister also said that lowering of taxes will give a “great stimulus to Make In India initiative”.

The stock exchanges surged within minutes of the news because for most established companies the tax cut would immediately lead to a pro-rata increase in profits.

Further Measures

The government has also decided to not levy enhanced surcharge introduced in Budget on capital gain arising from the sale of equity shares in a company liable for securities transaction tax (STT).

Also, the super-rich tax will not apply on capital gains arising from the sale of any security including derivatives in hands of foreign portfolio investors (FPIs).

What more, the minister said listed companies which have announced a buyback of shares prior to July 5, will not be charged with super-rich tax.

The companies have now also been permitted to use their 2 per cent Corporate Social Responsibility (CSR) spend on incubation, IITs, NITs, and national laboratories.

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