Mumbai: Commerce minister Piyush Goyal Friday said he "hopes" the tax relief measures announced by the government for the corporates will give the necessary fillip to growth that has been sputtering for long. The measures also get our tax rates comparable to those in the US and in South Asian economies, if one were to include the exemptions thrown in, Goyal said, adding these will help push investments up.
With an eye to push growth, which has slipped to a six-year low in the June quarter--which is even below that of Pakistan's 5.4 percent--finance minister Nirmala Sitharaman earlier in the day announced a raft of changes in direct taxes, including a 10 percentage points cut in corporation taxes to 25.17. The measures, which come a day after Reserve Bank governor Shaktikanta Das had warned against any fiscal measures to spur growth saying the government has little fiscal space to do so, will entail a revenue sacrifice of Rs 1.45 lakh crore to the exchequer this year.
"Some excellent announcements have just been made which will I hope give the necessary fillip to growth that we have all been waiting for," Goyal said, speaking at an event organised by the Indo American Chamber of Commerce. If one were to include the exemptions, the tax rate now is competitive and comparable to those in the US and elsewhere in South Asia, he said, pointing out that the US taxes corporate at 21-22 percent.
Goyal said using the exemptions, our tax rates are as low as 15 percent as well, and added this will help push investment that has been lagging historical averages in the past five years. He said the Rs 1.45-lakh-crore gains will go directly into the purses of businesses and individuals, and said the same can be used for investments, which in turn will spur the sputtering growth engine.
It can be noted that private capex is among the lowest at present, and the government has also included a move to tax new investments in manufacturing at 15 percent. After the announcement, the corporate tax rate will be 25.17 percent including surcharges, while the minimum alternative tax will go down by 3.5 percent to 15. Goyal named large tax payers like Wipro, Infosys and Coal India, which do not seek any exemptions, as significant beneficiaries of the tax relief measures.
Amid many corporates eyeing the education sector through initiatives such as Mukesh Ambani's Jio Institute, Goyal said the measure to recognise aid to publicly funded universities will attract corporate to the education sector. He said the government wants public private partnerships in innovation, which will be possible now with spends on research and development being recognised as CSR.
The government also slashed offered a lower rate to 17.01 percent for new manufacturing firms to boost to help create jobs. Unemployment had last year hit a 45-year nadir at 6.7 percent--a set of data that the government has not officially released.