Industry stalwarts welcomed the corporate tax cut announced by the finance minister on Friday but felt that it could have done much before. At the India Today Conclave in Mumbai, the industrialists said that the tax cut will help in addressing the supply side issues, but need more policy changes like GST rate cut and reduction in the interest rate of loans for reviving the consumer confidence and demand. They also agreed that the government is in a tight situation to offer tax cuts for individuals as it will hurt its revenue.
T.V. Mohandas Pai, Chairman, Manipal Global Education said that the economy has gone through back-to-back shocks--- GST, demonetisation, bankruptcy code, Real Estate regulation act, non-performing asset (NPA) crisis and liquidity crisis in non-banking finance companies (NBFCs)--- and it destroyed the ability of the institutions to respond to crisis. Interest rates should have come down two years ago. Investors are scared of tax terrorism. The government is not talking to the industry and wealth creators of the country are not taken into confidence. The corporate tax rate cut will prove to be a good move in the next 2-3 years.
Niranjan Hiranandani, MD, Hiranandani Group said that the government has finally recognised the cancer. So far we were giving paracetamol for cancer. With the new tax cut, the chemotherapy has started. Now we need to address the issues in the demand by reducing GST rates. He added that the corporate tax cut will not help to reduce the prices of the flats beyond 5 per cent.
Amitabh Kant, CEO, NITI Aayog responded that the country has grown at an average 7.5 per cent in the last 5 years and brought about 270 million people out of poverty. If we had cancer, the country couldn't have achieved this feat. The corporate tax has now come down on par with East Asian countries. About Rs 80,000 crore will flow down to bottom line of companies with the tax rate cut. He asked the manufacturers to pass on the tax benefits to consumers by reducing the prices of the products.
"The government has passed on the tax benefits to corporates. Now it's their responsibility bring back the demand. This is the beginning of reforms and many more will follow," said Amitabh Kant, CEO, NITI Aayog.
R.C. Bhargava, Chairman, Maruti Suzuki and Pawan Goenka, MD, Mahindra and Mahindra said that the tax benefit will be passed on to the consumers, but the benefit may not be huge. They claimed that the automakers are already giving discounts to consumers and there is not much headroom for a big discount. If the benefit is passed on 100 per cent, the reduction in prices would come down by 5 per cent. They added that the crisis in passenger car sales is not because of the millennials and taxi aggregators like Ola and Uber.
"Liquidity position of the NBFCs should improve to revive the market. NBFCs do what banks cannot do. Besides, the interest rates should be cut by 100 basis points. If the real interest rates, which is 10 per cent or above, falls, we can achieve the about 7.5 per cent growth in the next three quarters," said T.V. Mohandas Pai, Chairman, Manipal Global Education.
Ajay Piramal, Chairman, Piramal Group said that the liquidity is the bigger issue that the industries are facing. He advised that the tax departments should stop terrorizing and humiliating the taxpayers. We have enough data available in today's time to check the financial transactions of individuals. The agencies should use the benefits of technology.
Adi Godrej, Chairman, Godrej Group welcomed the government's corporate tax cut but said that the tax reduction will not leave so much with the companies to deeply slash prices. He argued for GST rate reduction and said that the taxes will always help in increasing tax collections. When GST came, the prices of soaps decreased and it helped in increasing the consumption.