Reserve Bank of India Governor Shaktikanta Das gave his first reaction to the corporate tax rate cut at the India Today Conclave in Mumbai on Friday. "This is a bold and welcome decision... it will augur very well for our economy," Das said at the event. Das was speaking at the India Today Conclave when Finance Minister Nirmala Sitharaman made the announcement in Goa ahead of the GST Council meet. The government has cut corporate tax from 30 per cent to 22 per cent. In his first reaction, Das said: "This (corporate tax) was one of the hurdles, and the measures will help revive the economy", adding the new tax rates would bring India closer to "tax rates in this part of the world".
On a series of key lending rate cuts since he took power, the RBI Governor said the law of the land mandated the RBI to ensure price stability. "But how much lower we can go down depends upon the data we gather on the economy. India can't be compared with advanced economies," he said.
Meanwhile, Finance Minister Nirmala Sitharaman also announced a tax cut for new manufacturing companies. "We today propose to slash the corporate tax rates for domestic companies and new domestic manufacturing companies," the finance minister said at a press conference in Goa. "To promote growth, a new provision has been inserted in the income tax act with effect from the fiscal year 2019-20, which allows any domestic company to pay income tax at the rate of 22% subject to the condition they will not avail any incentive or exemptions," the FM said. She said the effective tax rate for these companies would be 25.17 per cent, inclusive of all surcharge and cess.
The FM also said that another insertion would be incorporated to the Income Tax Act with effect from 2019-20, which would allow any new domestic company incorporated on or after October 1, 2019, making fresh investment in manufacturing an option to pay income tax at the rate of 15 per cent. She said the decision was taken to boost Make in India initiative.
Sitharaman said the government had also decided to reduce Minimum Alternate Tax (MAT) to 15% from the existing 18.5%, which would also provide relief to several companies. The minister said companies opting for 22 per cent income tax slab would not have to pay MAT. Giving a huge relief to listed companies, which have already made public announcements regarding buyback before July 5, 2019, the FM said there would be no tax on buyback of shares in such cases. Today's presser by the FM was her fourth media conference after a series of measures to fight economic slowdown.
Edited by Manoj Sharma