Modi 2.0's Corporate tax cut receives big thumbs-up

Modi 2.0's Corporate tax cut receives big thumbs-up

On Friday, Union Finance Minister Nirmala Sitharaman proposed to cut corporate taxation to 22 percent by forfeiting Rs 1.45 lakh of tax revenue.  This means that those corporates that won't be availing tax exemptions shall pay lesser taxes.  If they avail of exemptions, they will pay old rates.  New manufacturing companies set up before 2023 will pay just 15 percent tax for a lifetime.  

Experts and the industry have given the decision a thumbs-up. BSE and NSE responded with gusto in no time.  After losing Rs 15 lakh crore since Modi came to office in May, stock market recovered Rs 10 lakh crore within hours.  

But one can't be over-optimistic.  Harsh Gupta is modest in expectations.  He says, "Difficult to overestimate +ive impact of the corporate tax cut. Our corporate profits to GDP were at a low. That receives a boost, so will capex with a lag. Biggest boost would be one of sentiment, of animal spirits. It is a demand boost insofar deficit expands."

The tax cut addresses the supply-side issues of the economy.  Companies moving out of China have received an invitation by India to come and invest here.