Prime Minister Narendra Modi hailed his government’s decision of slashing corporate tax rates for the local businesses. He called the decision ‘historic’. The Prime Minister took to Twitter and lauded the announcement, which was made by Union Finance Minister Nirmala Sitharaman. “The step to cut corporate tax is historic. It will give a great stimulus to #MakeInIndia, attract private investment from across the globe, improve competitiveness of our private sector, create more jobs and result in a win-win for 130 crore Indians,” he said on micro-blogging site. Reiterating his commitment towards the $5-trillion dream for Indian economy, “the announcements in the last few weeks clearly demonstrate that our government is leaving no stone unturned to make India a better place to do business, improve opportunities for all sections of society and increase prosperity to make India a $5 Trillion economy.”
The government on Friday slashed the income tax rate for companies by almost 10 percentage points to 25.17 per cent and offered a lower rate to 17.01 per cent for new manufacturing firms to boost economic growth rate from a six-year low by incentivising investments to help create jobs. Finance Minister Nirmala Sitharaman said the reduction in tax rates has been done by promulgating an ordinance to an amendment to the Income Tax Act. "In order to promote growth and investment, a new provision has been inserted in the Income Tax Act, with effect from financial year 2020. It will allow any domestic company an option to pay income tax at 22 per cent subject to the condition that they will not avail any exemption or incentives," she said. After considering surcharges and cess, the effective tax rate will be 25.17 per cent. This compares to 30 per cent corporate tax rate currently, and an effective tax rate of 34.94 per cent.
Commerce minister Piyush Goyal said he "hopes" the tax relief measures announced by the government for the corporates will give the necessary fillip to growth that has been sputtering for long. The measures also get our tax rates comparable to those in the US and in South Asian economies, if one were to include the exemptions thrown in, Goyal said, adding these will help push investments up.