New Delhi: Total revenue foregone for reduction in corporate tax rate is estimated at Rs 1.45 lakh crore per year, said Finance Minister Nirmala Sitharaman on Friday while announcing a proposal to slash corporate tax for domestic companies and new local manufacturing companies.
The government has slashed basic corporate tax rate to 22% from 30%, while for new manufacturing companies it has been brought down to 15% from 25%.
On the move's fiscal deficit impact, Sitharaman said, the effect is being closely monitored. The measures will provide a fillip to growth that had fallen to six-year low of five per cent in June quarter.
As Sitharaman made some big announcements, Sensex zoomed over 900 points to 37,042.59, while Nifty rallies 254 points to 10,959.10. Rupee also rallied 66 paise to 70.68 against US dollar.
The announcement comes amid demand for rate cut, keeping in mind the revenue position and the need to boost sagging economic growth. The GST (Goods and Services Tax) Council, headed by Sitharaman, held a crucial meeting to decide on tax moderation.
There have been demands pouring in from various sectors — from biscuits to automobiles and FMCG to hotels — to reduce tax rates in the wake of economic slowdown. The argument propagated has been to boost the consumption and domestic demand by reducing GST rates further.
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