Stating that “green shoots” are visible with several companies showing interest to invest in the country, Finance Minister Nirmala Sitharaman Monday said that the corporate tax reduction will help attract fresh investment and jobs generation through Make in India.
Sitharaman said there has been no decrease in direct tax collections and the gross mop-up rose 5 per cent during April-November this financial year, adding that maximum direct tax collections come in the final quarter of the financial year.
The recent cut in corporate tax was not aimed to benefit certain companies but the entire industry, the Finance Minister said, adding that “people are approaching” the government for fresh investment which will help in generating more jobs as well as make India a manufacturing hub in the future.
“Yes, it is the decision (corporate tax reduction) which has resulted in revenue foregone ... approximately about Rs 1.45 lakh crore could be foregone,” she said while replying to a debate on Taxation Laws (Amendment Bill) in the Lok Sabha.
On corporate tax cut, the Finance Minister further said, “Yes, we are conscious of it and we are conscious that if not today, in a matter of a year you will have a lot of investment coming into this country. I can see the initial green shoots.”
The whole objective of reducing corporate tax was to drive and attract manufacturing investments from all over the world. This had prompted the government to introduce a special rate of 15 per cent for new investments from new companies that go into operation between October 2019 to 2023, she said.
On the possibility of a personal income tax cut, Sitharaman said she would rather deal with the matter separately based on its merit. On queries why the government did not reduce personal income tax to spur demand, she said tax benefits to individuals are reviewed periodically and the government will take action at an appropriate time.
The government in September had announced a cut in the corporate tax rate, wherein corporate tax for existing companies was reduced to 22 per cent from 30 per cent, and to 15 per cent from 25 per cent for new manufacturing firms incorporated after October 1, 2019, and starting operations before March 31, 2023.
After the MPs asked about slowing economic growth following GDP growth slipping to 26-quarter low of 4.5 per cent in July-September, Sitharaman said it was not the first time that the GDP growth rate had slowed to 4.5 per cent. The minister said in the fiscal 2012-13 also the GDP had recorded sub-5 per cent growth, but it increased later. “It is possible to go up,” she said, adding the government was “proactive” in addressing challenges being faced by the economy.
Clarifying on an error in the Taxation Laws (Amendment Bill), 2019, which said the reduced MAT will come into force from the next financial year beginning April 1, 2020, she said that the lower rate of 15 per cent minimum alternate tax (MAT) announced as part of the corporate tax rate cuts in September will be applicable from the current financial year. The intention, she said, has always been to apply reduced MAT rate from 2019-20.