India Joins RBI’s Efforts to Boost Growth With $20 Billion Plan

Marco Green
September 21, 2019

Sitharaman said that to "attract fresh investment in manufacturing and boost Make In India" the tax rate for new companies would be cut to 15 percent from 25 percent, the Press Trust of India news agency (PTI) said.

Ashutosh Datar, an independent economist, told AFP the tax cuts were "long overdue as India has one of the highest tax rates in the world".

The Finance Minister said that the government is also exempting GST on the supply of good and services to Federation Internationale de Football Association and other specified organisations which are a part of the U-17 Women's World Cup, which India will host in 2020.

"It is a real game-changer and the government should revisit personal taxation as well", TVS Motor Chairman Venu Srinivasan said soon after the Finance Minister Nirmala Sitaraman made the blockbuster announcement in Goa.

"The tax rate cuts come at the right time before festive season and will spur investments and create jobs".

Battling a six-year low economic growth and a 45-year high unemployment rate, the government on Friday slashed corporate tax rates for companies by nearly 10 per cent to 25.17 per cent to bring them at par with Asian rivals such as China and South Korea, as it looked to boost demand and investments.

The rupee INR=D4 rose as much as 0.9% to 70.68 against the dollar, its strongest level since August 9. The effective new rate will be 25.2 per cent including all additional levies and is applicable only for companies.

"This is bigger (news) than last 20 budgets", said Samir Arora, fund manager at Helios Capital said in a tweet. This is the biggest announcement so far by the Modi 2.0 government to fight the slowdown, which dragged down the GDP growth to a six-year low of 5 per cent in the April-June quarter of the current fiscal.

This is a big boost to corporates and would increase profits in their hands. "A bold, progressive step forward". Also, such companies shall not be required to pay Minimum Alternate Tax (MAT).

"We are conscious of the impact all this will have on our fiscal deficit", she said, without elaborating.

The Finance Minister also said that import of specified defence goods which are not being manufactured indigenously have been exempted from GST/IGST till 2024.

Some analysts are doubtful the new measures will drive consumer consumption, which has taken a hit. The RBI is now expected to back the government's present move with an interest rate cut next month. "But by itself it may not be enough to revive the investment climate".

Other reports by Click Lancashire

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