Industry Reacts to Change in Corporate Tax

India's Finance Minister has recently announced a slash in Corporate Tax, which gave the Business Houses in India a sigh of relief. They are considering this decision of Indian Government will fire up the economy. Here we have covered a few industry leaders' point-of-view.

Covestro India

Ajay Durrani
Covestro India
"The recent change in corporate tax in India is a very positive and bold step taken by the government. Reduction in Corporate Tax to 25 percent will spur the economic growth of the country in a big way and will also provide relief to domestic and manufacturing companies to a larger extent. With this positive step, the Indian tax level is now at par with the global tax level and will open doors for Indian companies to compete internationally".

Aarti Industries Limited

Rajendra V Gogri
Chairman & Managing Director
Aarti Industries Limited
"The change in corporate tax structure is the single biggest direct tax reform in the last two decades and is no small accomplishment. The revised tax rate of 15 percent is amongst the lowest in the world and would be a great catalyst to the Make-in -India program for attracting foreign investment. It will also provide better opportunities for manufacturers to play a neutral role in the existing trade war between US and China. Manufacturers in India can now export at a reasonable tariff taking the opportunity in servicing global markets to demonstrate its competitiveness and attractiveness relative to other neighbouring countries. This will lead to an increase in employment opportunities and support ancillary business surrounding the large-scale industrial growth, resulting in an overall economic development.

In addition to the cut in corporate tax rate, cost differentiation, low labour cost, capex and opex savings, skilled workforce, stronger IP protection, and better regulatory framework will also help position India as a favourable country to do business with. We expect Indian companies, trade associations, and the Government to act more aggressively in capitalizing on the opportunity and look forward to collaborating with global companies to set up their base in India. This move will indirectly look to position India as a global sourcing hub for specialty chemicals. Considering the deadline of March 2023, these reforms will act as an accelerator for new investments to boost growth in specialty chemicals and pharmaceuticals businesses in India.

At Aarti Industries, we have been trusted by global specialty chemicals conglomerate for multi-year contracts to produce various specialty chemicals. We have developed a diversified and de-risked portfolio comprising of about 200 products that are marketed to more than 1100 customers across the globe. Aarti Industries is also benefitting from its deep relation with domestic customers, who are setting up for expanding capacity and downstream products, as a structural shift of global demand continues to favour consistent Indian suppliers. Aarti Industries has been committed to its growth initiatives with thrusts to continuously improve on the sustainability initiatives as well. These tax reforms help us provide additional incentives and rationale to our global customers to look at India as a strategic sourcing destination and thereby help us contribute to the larger Indian cause.

Praj Industries Limited

Sachin Raole
CEO & Director
Finance & Commercial
Praj Industries Limited
"On the backdrop of weak economic numbers and sentiments, Hon. Finance Minister, Ms. Nirmala Sitharaman announced major corporate tax reduction across the board. The reduction in corporate tax has happened after 14 years and that clearly shows the importance of the corporate taxes from the Government's revenue budget. The Taxation Laws (amendment) Ordinance, 2019, reduced the effective corporate tax rate for all domestic companies from 34.94 percent (including surcharge of 10 percent and cess of 4 percent) to 25.17 percent. For the manufacturing companies incorporated after 1st October 2019 and commencing commercial production on or before 31st March 2023, the effective tax rate is further slashed to 17.16 percent. What does this mean for corporate India and the economy? For corporate India, the reduction in the tax rate clearly brings it at par with their ASEAN counterparts and gives them a level playing field in the global economy. Corporates, before choosing the lower tax regime need to be aware about certain conditions. While choosing the lower tax rates, the domestic company will not be allowed to claim deductions/incentives like deduction available to SEZ units, accelerated depreciation, expenditure on in-house scientific research, deductions under Section 80- IA, 80-IAB, 80-IE etc, losses brought forward attributable to the above mentioned deductions. Most importantly, MAT credit will not be available for setting off against the payment of lower tax. Corporate India really needs to assess the situation before opting for lower tax rate because once the option is taken, a corporate cannot go back to the old tax regime. This also indicates that in the near future we will usher in the era of Direct Tax Code

For the Indian economy, it can be a major boost in a form of providing impetus to the Make-in-India initiative and attract more foreign investment in the manufacturing space. It can also fuel the consumption cycle as corporates are passing on the benefits of the reduced tax rate to the consumers. All in all, reduction in corporate tax rate has the potential to bring the economy back on to a growth path".

Ava Chemicals Pvt Ltd

Viejay Bhatia
Ava Chemicals Pvt Ltd
"Finance Minister Nirmala Sitharaman's decision to slash basic corporate tax rate to 22% from 30% for existing corporates and reduction from 25% to 15% for new manufacturing companies - is undeniably, one of the most significant corporate tax reform announced after the goods and services tax (GST).
The new rate will be reducing the cost of capital and catalyze investments by repositioning India as one of the most competitive economies. Lower tax outflows will leave more cash with firms and can help to boost the investment. Aside from tax rate reduction, it also steps forward in streamlining and simplifying the direct tax structure. Also, the competitive rate of taxation will increase India's investment.

Many economists are of the opinion that the corporate tax cut will help in pushing the fiscal deficit closer to 4 per cent of gross domestic product.

With the new tax system, India to become an aggressive market in the region with the rates similar to those prevailing in the ASEAN countries.
Reduction of corporate tax will bring the overall positive growth. The industry will utilize this endowment in the most prudent way, and will help to improve the economy.

Due to the prevailing slow growth scenario, automobile companies and other corporates in the FMCG sector have already slashed product prices and/or starting offering discounts. It needs to be seen how much actual tax benefit gets passed to the end consumers".