₹1.45L-cr corporate tax cuts finalised by govt in 36 hours

NEWDELHI: Thirty-six hours. That was all the time the government machinery had to work out the nitty-gritty and implement the ₹1.45 lakh crore of corporate tax rate cuts that Prime Minister Narendra Modi approved, using a special dispensation called Rule 12, on Wednesday afternoon, two people aware of the development said.

Rule 12 empowers the Prime Minister to take a decision and get the cabinet’s ratification of it later, they said, requesting anonymity.

“To meet a situation of extreme urgency or unforeseen contingency in any particular case, Rule 12 of the Government of India (Transaction of Business) Rules, 1961, empowers the Prime Minister to permit or condone a departure from these rules, to the extent deemed necessary,” one of the people said, quoting from the

prepared by the Cabinet Secretariat.

Finance minister Nirmala Sitharaman on Friday slashed corporate tax rates for domestic manufacturers from 30% to 22%, while for new manufacturing companies, the rate was reduced from 25% to 15% provided they do not claim any exemptions.

Thecutswereamongthemost sweeping ever announced by an Indian government, which would forego ₹1.45 lakh crore in revenue, hailed by corporate entities as historic, and cheered by the markets. They are intended to stoke economic growth that decelerated to 5% in the quarter ended June, the slowest pace in more than six years.

Although the political decision at the top was quick in coming, the background against which it was taken had been prepared well in advance; the proposal was kept under the wraps for weeks within the top echelons of the government, the people cited above said.

The government is conscious of the steep cost of the tax reductions. But it is confident of making it up through more efficient revenue collection as well as by plugging leakages in expenditure, the people said.