The Congress party has said the Modi government's decision to reduce corporate tax from 30 per cent to 25.2 per cent is a "welcome step but it's doubtful whether the investment will revive" the economy facing a severe crisis. In his first reaction after Union Minister of Finance Nirmala Sitharaman's another presser ahead of the GST Council meet today, senior Congress leader Jairam Ramesh said these measures would do nothing to dispel fears among Indian companies.
"A headline-itis afflicted, panic-stricken Modi Sarkar has cut corporate tax rates less than 3 months after a Budget and 4 months before the next one. This is welcome but it is doubtful whether the investment will revive. This does nothing to dispel fear that pervades in India Inc'," he tweeted.
A headline-itis afflicted, panic-stricken Modi Sarkar has cut corporate tax rates less than 3 months after a Budget and 4 months before the next one. This is welcome but it is doubtful whether investment will revive. This does nothing to dispel fear that pervades in India Inc.- Jairam Ramesh (@Jairam_Ramesh) September 20, 2019
Saying the timing of FM's latest announcements was dictated by Prime Minister Narendra Modi's 'Howdy Modi' event scheduled to be held in the United States on September 22, Ramesh indicated it was done to please foreign investors. PM can now say, "I have come to Texas promising lower Taxes. Is this his 'Trump card'? Ramesh asked.
Sitharaman earlier said the Centre had decided to slash the corporate tax rates for domestic companies and new domestic manufacturing companies. The current corporate tax rate is 30 per cent, which has now been brought down to 22 per cent. The effective tax rate for such domestic companies now stands at 25.17 per cent, including cess and surcharge; earlier it was 34.94 per cent. Also, such companies shall not be required to pay Minimum Alternate Tax (MAT).
For new manufacturing companies, the existing tax rate is 25 per cent, which has been brought down to 15 per cent. The new domestic companies incorporated on or after October 1, 2019, making fresh investment in manufacturing could pay income tax at a rate of 15 per cent, she said. The earlier rate was 25 per cent. The government will take a hit of Rs 1.45 lakh crore after the reduction in corporate tax and other relief measures announced on Friday.
Edited by Manoj Sharma