There are pressure on the government in meeting revenue target due to sagging economy. The economy has hit six-year low of 5% during the first quarter of the current fiscal.
It is estimated that growth in the second quarter to remain below 5%. The overall growth of the current fiscal likely to remain subdued and various estimate indicates that the GDP growth to be lower than 5.5 per cent, putting pressure on the tax collection.
Besides, the government decision to lower corporate tax rate will have revenue implication of ₹1.45 lakh crore and rollback of enhance surcharge and other measures will also bring down tax collection.
Finance Minister Nirmala Sitharaman on September 20 announced a cut in corporate income taxes for domestic companies to 22% from 30% previously. This would bring effective corporate tax rate, including all additional levies, to about 25.2%, for companies which are not receiving any incentives or exemptions.
New manufacturing companies formed after October 1 will enjoy a 15% (effective rate of 17%) corporate income tax rate, against 25% previously.
The move is estimated to result in ₹1.45 trillion in revenue loss for the government during 2019-20.
Subsequent to this, there have been demands for a reduction in income tax rates for individuals as well so as to put more money in the hands of the common man for a consumption-led revival of the economy. India's economic growth had slipped to a six-year low of 5% in the April-June quarter and the revival may take a few quarters despite announcements to boost real estate and financial sectors.
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