Govt slashes corporate tax rates to boost sagging growth

New Delhi: The government on Friday announced a 10 percentage point cut in the corporate tax rate to 25.17 per cent to boost the sagging economy and bring the tax rates at par with Asian rivals like South Korea and China.

Finance Minister Nirmala Sitharaman announced reducing the base tax rate for existing companies to 22 per cent from the current 30 per cent, and for new manufacturing firms, incorporated after October 1, 2019, and starting operations before March 31, 2023, to 15 per cent from the current 25 per cent.

The effective tax rates after surcharges would be 25.17 per cent for existing companies and 17.01 per cent for the new companies against the current rates of 34.94 per cent and 29.12 per cent respectively.

In her fourth phase of post-budget stimulus measures, Sitharaman announced that the companies will not have to pay minimum alternate tax.

The new tax structure is effective from April 1, 2019, and will bring Indian corporate tax rate at par with Asian peers in a bid to attract investments.

To provide relief to companies which continue to avail exemptions and incentives, rate of MAT has been reduced from existing 18.5 per cent to 15 per cent.

The finance minister also said no tax will be charged on share buyback by listed companies that announced such a move prior to July 5.

Also, super-rich tax by way of enhanced surcharge on income, announced in the July 5 Budget, will not apply to capital gains arising on equity sale or equity-oriented funds liable to securities transaction tax (STT) with a view to stablise flow of funds into capital markets.

Any company which does not opt for concessional tax regime and avails tax exemptions or incentives shall continue to pay tax at pre-amended rates. These companies can opt for concessional tax regime after the expiry of tax holiday or exemption.

Sitharaman said the measures will promote growth and investment, but sidestepped questions on its impact on fiscal deficit.

The government is battling a six-year low economic growth and a 45-year high unemployment rate.