Diplomatist Magazine Diplomatist October 2019 | Page 56

CORPORATE TAX RELIEF
AN ELIXIR FOR THE INDIAN ECONOMY
BY NOOPUR AGASHE, DIPESH PANICKER AND LOVNISH SAHNI*
The story so far
On 05 July 2019, the Indian Finance Minister presented
the fi rst Budget of the newly formed Government. At the
end of the Budget announcement, which aimed at delivering
growth, the corporate tax rates remained unchanged.
However, the government extended the moderate corporate
tax rate of 25%[1] for a domestic company having total
turnover/ gross receipts not exceeding INR 4bn.[2] In this
regard, the Indian Finance Minister, in her budget speech,
stated that such a move would cover 99.3% of domestic
companies. This left out only 0.7% of domestic companies
outside this rate. Clearly, small and medium-sized businesses
were the benefi cial recipients of the tax relief, while large
companies continued to pay taxes at the higher rate of 30%1.
The Budget and the announcements made thereafter
outlined the Government’s vision to propel India to a US$5tn
economy by 2024, by introducing several reforms, such as
providing stimulus to infrastructure, manufacturing and
liberalisation in the Foreign Direct Investment (FDI) norms
in various sectors.
Be that as it may, the Indian economy witnessed its
slowest pace of growth in over six years with Gross Domestic
Product (GDP) growth recorded at 5% in the fi rst quarter of
the fi nancial year 2019-20, following a sharp slowdown in
consumer demand and subdued investment.
To tackle the continued slowdown in the growth of the
Indian economy, the Government has introduced a slew of
measures such as setting up of dedicated cell to resolve the
problems of start-ups, measures to boost demand for the
automobile industry. One amongst such measures is the
signifi cant reduction of corporate tax rates.
The Taxation Laws (Amendment) Ordinance, 2019, to
amend the Income-tax Act, 1961 (the Act) and the Finance
(No.2) Act, 2019, is the latest development on direct tax-
56 • Extraordinary and Plenipotentiary Diplomatist • Vol 7 • Issue 10 • October 2019, Noida