FINANCE MINISTER Nirmala Sitharaman Sunday said the government’s decision to tax new manufacturing units set up after October 1 at 15 per cent would put India at the top of the pecking order amongst its Asian peers.
“It should be seen as a big supply side reform. We are giving 15 per cent… no other country is offering such a low tax rate. Companies availing of this option (and not claiming any exemption or incentive) will not pay the minimum alternate tax.
“The best part is certainty — there is no sunset clause. Companies starting production on or before March 31, 2023, will pay just 15 per cent tax. It will be difficult for any government to go back on this now,” Sitharaman told mediapersons.
The Finance Minister was also confident that foreign companies would look at India while considering investment in the Asian region. “This is credit positive supply side reform… rating agencies have endorsed it,” she said.
While the Minister acknowledged that it entailed a revenue loss of Rs 1,45,000 crore for the full year, she said the fiscal deficit target for 2019-20 was not being revised yet. “We will take a call later in the year. I will look at the numbers at the RE (revised estimates) stage,” Sitharaman said. Further, the government was going as per schedule on meeting disinvestment targets, she said.
Sitharaman said the government moved at dramatic speed once the decision was taken in principle. Asked about the thought behind reducing the corporate tax rate for existing companies to 22 per cent, she said the idea was to hold the effective rate at 25 per cent so that it makes a meaningful difference to companies.
According to the Finance Minister, she has not applied her mind on any cuts or concessions on personal income tax. “But look at the full picture. Companies would make more profits due to a cut in corporate tax rate, and will give more dividends. This will give more money in the hands of investors, and contribute in improving demand,” she said.