India FY20 fiscal deficit may surge 70 bps on govt tax measures
1 min read 20 Sep 2019, 12:01 PM ISTSitharaman said the revenue loss to the exchequer will be ₹1.45 trillion in 2019-20In her budget presented in July, Sitharaman had slashed fiscal deficit target to 3.3% of GDP
PremiumGoa: India's fiscal deficit is likely to surge at least 70 basis points to 4% of GDP in 2019-20 as a result of the corporate tax cuts announced by finance minister Nirmala Sitharaman on Friday in Goa.
The finance minister said the revenue loss to the exchequer will be ₹1.45 trillion in 2019-20. In the Union Budget presented in July, Sitharaman had slashed fiscal deficit target to 3.3% of GDP from 3.4% estimated in the interim budget presented in February. "We are conscious of the impact it will have on fiscal deficit," Sitharaman told reporters while announcing the tax measures.
The government cut corporate tax rate for domestic companies that do not avail of any tax incentive to 22%. Effective corporate tax rate after surcharge will be 25.17%.
Watch video: Big boost for Make in India, corporate tax for domestic firms slashed
New manufacturing companies will have to pay an even lower corporate tax rate of 15%.
Sitharaman told reporters that an Ordinance has been cleared earlier in the day giving effect to the amendments to the Income Tax Act. The tax relief is part of steps the government has been announcing after consultations with the industry, on a weekly basis, to deal with the slowdown, the minister said.
The announcements come in the wake of a downturn in the economy, with India’s GDP growth slowing to a six-year low of 5% in April-June.
Meanwhile, lower tax collections, both direct and indirect tax, has already raised apprehensions of government's ability to meet its 3.3% fiscal deficit target for the year.
