Auto industry reactions to FM’s announcement for reduction in corporate tax rate

The announcements made by the FM included a cut in base corporate tax for existing companies from the current 30 per cent to 22 per cent.

By: | Updated: September 20, 2019 5:05 PM
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Finance Minister Nirmala Sitharaman has today announced post-budget economic stimulus measures. The announcements made by the FM included a cut in base corporate tax for existing companies from the current 30 per cent to 22 per cent. For new manufacturing firms which are incorporated after October 1st 2019 and starting operations before March 31, 2023, the same has been reduced from the current 25 per cent to 15 per cent. This will be effective on the condition that these companies will not avail any other incentive or concession such as tax holiday enjoyed by units in Special Economic Zones (SEZ) and accelerated depreciation.

SIAM President, Mr Rajan Wadhera, welcomed the bold announcements made by Hon’ble Finance Minister today, including the reduction of the corporate tax rate to 22% and No Minimum Alternate Tax for companies not availing incentives under Income Tax Act. Additionally, the reduction of corporate tax to 15% for new companies making fresh investments from 1 st October 2019, will support investment and also FDI in the auto sector. This is expected to give a big boost to Make in India for the automobile industry. Expansion of scope of CSR expenditure to include incubation centres and R&FD activities will also help with R&D expenditures in the automobile sector. All these set of fiscal measures are expected to uplift market sentiments and improve demand for automobiles. Mr Wadhera emphasized that these are indeed landmark announcements and would certainly help in reviving growth in the Indian Economy. He truly appreciated the leadership of Hon’ble Finance Minister in making India globally competitive in terms of taxation rates. These set of major tax reforms are a clear indicator of the Government of India’s commitment to improving the Business environment to give a definite boost to economic growth.

Nagesh Basavanhalli, MD and CEO, Greaves Cotton Ltd “We welcome the Finance Minister’s proposition of slashing corporate tax, scrapping surcharge on buyback announced before July 05 and expanding the scope of CSR spend. These measures will cheer the industry and add much-needed momentum to the economy ahead of the festive season. One can hope that these measures will have a positive rub-off on consumer sentiments too. One had also hoped that the government would take a considerate view on the auto industry's call for reduced GST, that could have galvanized the auto sector ahead of Diwali and Dusherra.”

Martin Schwenk, Managing Director & CEO, Mercedes-Benz India said "Reduction in corporate tax to 22 per cent is a shot in the arm as it is directly correlated to economic growth. Reduction of corporate tax has been on the agenda and it will also boost ‘Make in India initiatives. It will promote investment, help sustain profitability during challenging times and should also improve buying sentiments, thus helping the auto sector in the long term.”

President ACMA, Deepak Jain, said, “The announcement made by Hon’ble Finance Minister is indeed heartening and reassuring. Reduction in Corporate tax to 22 per cent for existing companies, 15 per cent for new manufacturing companies and relief on account of MAT are steps in the right direction to give manufacturing, investments and economic activity a boost. The measures will also put India in the league of competitive economies in the world.” Jain also mentioned, “Expansion of scope of CSR expenditure to include incubation centres and public-funded institutions will also encourage R&D in the automotive industry”. “We do hope that the Central Government in consultation with the Sates will consider ensuring a uniform GST rate of 18% on all auto components. Currently, 60% of auto components are at 18%, while the rest are at 28%. A lower rate of GST will not only ensure better compliance but also help curb grey operations in the aftermarket”, added Jain

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