Tata Sons Chairman N. Chandrasekaran today called upon Finance Minister Nirmala Sitharaman at her North Block office in the national capital today. Sitharaman’s office tweeted a picture of the two meeting. Details of the meeting were not released.
The meeting of the finance minister with an industry captain is a welcome sign for a government which was until some time ago was increasingly being seen anti-business. But the perception in the last one month has tremendously changed as the government began to improve ease of doing business, lifted foreign direct investment curbs in coal mining and provided succor to the real estate sector. Last Friday’s cut in corporate tax rate to 22% was the biggest step that many have compared to the 1991 economic reforms.
Effective tax rate for companies will now be 25.17% inclusive of 10% surcharge and 4% cess. This settles the long-pending demand of the industry to cut corporate tax rate to 25% and pegs India’s corporate tax rate as the least in Asia.
Companies incorporated in India after October 1 this year and which begin production by 31 March, 2023 will enjoy an even lower tax rate of 15%, provided they do not avail of any other exemption/incentive. Effective tax rate for these companies will be 17.01% inclusive of surcharge and cess. This would attract not just local but also fresh foreign investment in manufacturing and boost ‘Make-in-India’. It comes at a time when many multinationals are looking to shift their production base out of China amidst a trade war with the U.S.
The minimum alternate tax was also cut to 15% as against 18.5% earlier that companies wishing to continue availing exemptions/incentives will now have to pay. This is the same rate that newly incorporated companies will also be paying. Coming as it did in times of a slowdown, this will increase compliance, free up a little extra capital and help companies invest more in capacities and R&D. This also makes it fair and transparent for all companies by keeping the lowest tax rate same for all.