Finance minister Nirmala Sitharaman has ushered in a new corporate tax structure, which is a massive reform that is expected to put the economy back on an 8% GDP growth path. The tax rate cut is aimed at reviving private investment, and creating a competitive environment for markets to grow.
The effective corporate tax rate will be lowered to around 25% from 30% and would be on par with Asian peers. This is a very significant announcement — Indian corporate tax was the highest among the fast-growing economies. This had put us on the bottom rung. Now with this decision, India will move ahead of many countries in terms of corporate returns.
Also, issues of consumption and manufacturing will get addressed. There will be more opportunities for the corporate entities to increase their earnings. The decision is expected to make conditions encouraging for new investments. Today’s step will also boost the government's Make in India strategy.
All the challenges of credit flow and private investment have been taken care of in one stroke.
The slowdown had hit the corporate houses, but this measure will ensure that enough boost is given to the industrial sector. The corporate sector is the biggest beneficiary and this will allow it to make new investments and renew capacity.
The fresh tax structure is effective from April 1, 2019. The change will be made through an ordinance to amend the Income Tax Act, 1961. This particular measure shows that the government has recognised the importance of feedback that was coming from all stakeholders of the economy. The views poured in from banks, manufacturing companies, entrepreneurs, individuals, etc, and the government was receptive.
While keeping the feedback in consideration, in the face of economic slowdown, the government took a slew of measures.. With this, all the short-term pain will be addressed and it will also ensure that the economy gets the momentum it needs in the long term.
(The author is National Spokesperson-Political and Economic Affairs, BJP)
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