Industrialist Anand Mahindra today praised the government for reducing corporate tax (File)
Industrialist Anand Mahindra today praised the government's move to reduce corporate tax in a bid to boost economic growth amid slowdown in several key sectors including manufacturing and finance. He termed the announcement by Finance Minister Nirmala Sitharaman as a "shot that will be heard around the world". The announcement also had an immediate effect on the markets, with the S&P BSE Sensex surging over 2,100 points and the NSE Nifty climbing above the 11,250 mark, after days of volatile trading.
"Woke up in the U.S to this news. The best way to start the day. Not only because companies will pay less tax. But because this isn't just another policy tweak. @nsitharaman fired a shot that will be heard around the world. India has sent an invitation letter to global investors," the Mahindra Group Chairman tweeted.
The effective corporate tax rate has been reduced from 35 per cent to 25.2 per cent, which includes all surcharges and is applicable on companies that aren't availing any incentives. Domestic firms incorporated on or after October 1, 2019 that want to make fresh investment in manufacturing will have an option to pay income tax at 15 per cent. The new tax structure is effective from April 1, 2019.
The Union Budget this year provided for 30 per cent corporate tax. Today's course correction comes at a time when the manufacturing sector, especially auto, which is one of the largest contributors to the Gross Domestic Product (GDP), has been struggling with massive job and production cuts.
Mr Mahindra soon entered into a duel with people on Twitter when they asked whether the government's latest decision was an admission that it had taken a bad call in the Union Budget.
"Didn't she had this wisdom three months back when she presented union budget? ...First you create a problem, allow it to go worse, fudge numbers... become a saviour... what a performance," Anand, a textile designer, asked the industrialist whose firm has a wide portfolio of SUVs.
"This is unbelievable. Do YOU always get things right the first time? Do you never have to retrace your steps? Do you not value & desire the humility in leaders to listen & recalculate their route?" Mr Mahindra replied.
To another person who tweeted "lives cannot be run on trail and error method", Mr Mahindra said, "Really? And you get everything right the first time? (By the way you just got the spelling of 'trial' wrong)".
The centre's move to reduce corporate tax puts India on par with other Asian nations. Domestic companies whose supply chain has been disrupted after getting caught in the protracted trade war between the US and China are likely to consider increasing their investment in India since the risk of high tax eating into their earnings is low now.