COR­PO­RATE TAX MOVE TO HELP ECON­OMY; OPEN TO CRIT­I­CISM: FM

WIN­TER SES­SION LS ap­proves Tax­a­tion Laws (Amend­ment) Bill, 2019, amid heated de­bate

Hindustan Times (Amritsar) - - Front Page - HT Cor­re­spon­dent let­[email protected]­dus­tan­times.com

NEWDELHI:The Lok Sabha on Mon­day passed the Tax­a­tion Laws (Amend­ment) Bill, 2019 to re­place the Septem­ber 20 or­di­nance that sharply re­duced cor­po­rate tax rates af­ter a stormy de­bate in the House dur­ing which fi­nance min­is­ter Nir­mala Sithara­man said the de­ci­sion was aimed at at­tract­ing in­vest­ment to spur growth and cre­ate jobs.

She said the de­ci­sion to re­duce cor­po­rate tax was a strate­gic one — to make In­dia a com­pet­i­tive in­vest­ment des­ti­na­tions for multi-na­tional com­pa­nies look­ing for an al­ter­na­tive to China amid the on­go­ing Sino-US trade war. She said In­dia was not the only coun­try in South­east Asia which has opted for lower tax rates.

She said the crit­i­cism that the govern­ment is not will­ing to lis­ten is “ab­so­lutely un­fair”. Her re­marks come in the back­drop of in­dus­tri­al­ist Rahul Ba­jaj’s re­marks that there was an “at­mos­phere of fear” and peo­ple were afraid to crit­i­cise the govern­ment.

“We do take their crit­i­cism, many of them on my so­cial me­dia han­dle, call me names. I have no prob­lems with that.”

NEWDELHI:The Lok Sabha on Mon­day passed the Tax­a­tion Laws (Amend­ment) Bill, 2019 to re­place the Septem­ber 20 or­di­nance that sharply re­duced cor­po­rate tax rates af­ter a stormy de­bate in the house dur­ing which fi­nance min­is­ter Nir­mala Sithara­man said the de­ci­sion was aimed at at­tract­ing in­vest­ment to spur growth and cre­ate jobs.

She said the de­ci­sion was a strate­gic one — to make In­dia a com­pet­i­tive in­vest­ment des­ti­na­tions for multi-na­tional com­pa­nies (MNCs) look­ing for an al­ter­na­tive to China amid the on­go­ing Sino-US trade war.

The govern­ment on Septem­ber 20 took the his­toric de­ci­sion through an or­di­nance that re­duced the cor­po­rate tax rate for do­mes­tic man­u­fac­tur­ing com­pa­nies from 30% to 22% and for new man­u­fac­tur­ing com­pa­nies from 25% to 15% pro­vided they forgo ex­emp­tions. The or­di­nance also ex­empted com­pa­nies opt­ing for the lower tax rate from pay­ing the Min­i­mum Al­ter­nate Tax (MAT); it also re­duced MAT from 18.5% to 15% for com­pa­nies that still wanted to avail it. The an­nounce­ment was the fifth round of fis­cal, ad­min­is­tra­tive and pol­icy mea­sures to stim­u­late the econ­omy since Au­gust 23 and the big­gest one, in­volv­ing a rev­enue im­pli­ca­tion of ~1.45 lakh crore.

Sithara­man, while in­tro­duc­ing the Bill, said In­dia was not the only coun­try in South­east Asia which has opted for lower tax rates. “The trade war be­tween Amer­ica and China is a prime rea­son. There were also in­di­ca­tions that many multi­na­tional com­pa­nies wanted to get out of China; we had all the rea­sons (to cut the rate),” she said.

She said any com­pany in­cor­po­rated af­ter Oc­to­ber 1 and in­vest­ing in a man­u­fac­tur­ing unit can opt to pay tax at the rate of 15%, as long as it does not avail any ex­emp­tions and starts pro­duc­tion be­fore March 31, 2023. With cess and sur­charge this works out to an ef­fec­tive tax rate of 17.01%.

Sithara­man said the crit­i­cism that the govern­ment is not will­ing to lis­ten is “ab­so­lutely un­fair”. Her re­marks come af­ter in­dus­tri­al­ist Rahul Ba­jaj said that there was an “at­mos­phere of fear” and peo­ple were afraid to crit­i­cise the govern­ment. “We do take their crit­i­cism, many of them on my so­cial me­dia han­dle, call me names. I have no prob­lems with that,” she said.

“We are a proac­tive govern­ment. I have met many peo­ple, many have said I am the worst fi­nance min­is­ter, even be­fore I com­pleted six months of work, I hear them out. I am will­ing to hear more,” said Sithara­man.

“We’re called ‘suit-boot ki sarkaar’ again and again. We’re told that low­er­ing cor­po­rate tax helps only rich. I want to tell them that cor­po­rate tax cut helps all small and big busi­nesses reg­is­tered ac­cord­ing to Com­pa­nies Act,” she added.

Be­fore the Septem­ber 20 de­ci­sion, the low­est rate of cor­po­rate tax was 25% (for com­pa­nies with a rev­enue up to ~400 crore), while other com­pa­nies were pay­ing 30%. That ef­fec­tively worked out to 29.12% and 34.9% re­spec­tively, with cess and sur­charge. Un­der the new regime com­pa­nies can pay tax at 22% (they won’t be el­i­gi­ble for any ex­emp­tions, though), which trans­lates into an ef­fec­tive tax rate of 25.17%.

The tax cut has been widely hailed by in­dus­try and ex­perts — for help­ing In­dian com­pa­nies be­come more com­pet­i­tive. In an opin­ion piece in Hin­dus­tan Times, San­deep Parekh, a part­ner at Fin­sec Law Ad­vi­sors, wrote that the govern­ment de­cided to un­shackle cap­i­tal and en­trepreneur­ship in one fell swoop with the move. “The move will in­crease prof­its at com­pa­nies and thus mean more in­come for in­vestors; it will al­low more space in the medium term to in­vest in cap­i­tal ex­pen­di­ture like build­ing more fac­to­ries...” he wrote.

Ac­cord­ing to of­fi­cial data re­leased on Fri­day, In­dia’s econ­omy grew 4.5% in the sec­ond quar­ter ended Septem­ber 30, 2019, the slow­est growth since March 2013.

DMK MP A Raja said the govern­ment’s re­fusal to ac­cept that there is an eco­nomic slow­down is com­pounded by its fail­ure to de­liver on prom­ises of re­mov­ing black money and cre­at­ing jobs.

“The govern­ment should in­crease ex­pen­di­ture, in­stead of these roll­backs and amend­ments to its Bud­get prom­ises,” said Congress leader Ad­hir Ran­jan Chowd­hury.

ANI

■ Union fi­nance min­is­ter Nir­mala Sithara­man dur­ing the de­bate on tax­a­tion bill in Lok Sabha on Mon­day.

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