India Inc Welcomes Government's Corporate Tax Announcements

Government slashes corporate tax for domestic companies

Sensex surges over 1500 pts after corporate tax cut announcement

In a major bonanza for corporates as part of measures to promote growth and investment, Finance Minister Nirmala Sitharaman on Friday announced to slash corporate tax rate to 22 per cent for domestic companies and 15 per cent for new domestic manufacturing companies, besides other fiscal reliefs.

Finance Minister has also announced the government decision to expand the scope of 2 per cent CSR spending.

India's equity benchmark, the S&P BSE Sensex, jumped as much as 5.3%, the most intraday since May 2014 and the rupee rallied after the announcement, while sovereign bonds slumped as fiscal concerns came sharply back to the fore.

"The markets have been asking for a big fiscal stimulus and the government has delivered", said Rusmik Oza, head of fundamental research at Kotak Securities in Mumbai. In the latest fiscal measures announced today (September 20), the government has slashed corporate tax rates to 22% for domestic companies and 15% for new domestic manufacturing companies. Nifty market cap was up at Rs 2.5 lakh crore.

India's economy, the world's 6th largest, was booming until recently but it has slowed in recent months, with growth in manufacturing dropping to 0.6% in the last quarter from 12% a year earlier.

Anil Agarwal, Executive Chairman, Vedanta Resources, said that the government move will definitely prove to be a huge impetus for the manufacturing and infrastructure sector.

New companies formed from October 1 will attract 15% tax and an effective rate of 17.01%, Sitharaman said.

Also, the super-rich tax will not apply on capital gains from the sale of any security including derivatives in hands of foreign portfolio investors.

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"I am not sure how lower tax rates would incentives companies to increase capex, when the private consumption engine has lost steam", said Rupa Rege Nitsure, chief economist of L&T Financial Services.

Stock exchanges in Europe were trading higher in their respective early sessions.

It has so far touched an intra-day high of 37,773.61 and a low of 36,085.74 points.

India cut corporate tax rates on Friday in a surprise move created to attract manufacturers, revive private investment and lift growth from a six-year low that has led to major job losses and fuelled discontent in the countryside. -China trade dispute, according to data compiled by Deloitte.

Further, in a bid to boost lending, the government on Thursday asked public sector banks to hold loan melas in 400 districts to lend to desirable shadow banks and retail borrowers, and said no stressed loan account of MSMEs will be declared an NPA till March 2020.

"GST rate on slide fasteners has been reduced from 18% to 12%, marine fuel 18% to 5%, 12% to 5% on wet grinders consisting of stone as a grinder, and 5% to zero on dried tamarind", Sitharaman said at a press conference following the council meeting, ANI reported.

On the global front, resumption of trade talks between the U.S. and China also buoyed market mood, traders said.

The news comes after stocks came under heavy selling pressure from foreign investors.

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