Corporate heads welcome FM Sitharaman's announcements

Further, the removal of surcharge on capital gains will act to boost the sentiment of the equity markets and the FPIs, Suman Chowdhury said.

Sep 20, 2019 12:09 IST India Infoline News Service

Nirmala Sitharaman
“The decision of the Government to reduce the Corporate Tax Rates and a slew of other measures augur well for boosting the economic activities in the Country. It is a welcome move which will bring in investment in new projects from freed up cash leading to employment opportunities, manufacturing growth and stimulus towards higher consumption. This move is surely expected to have positive effect on the Steel Industry which has strong forward and backward linkages.” said Anil Kumar Chaudhary, Chairman, SAIL.

Madhavan Menon, Chairman & Managing Director, Thomas Cook (India) Ltd. on CORPORATE TAX CUT said, "We welcome the announcement of the Finance Minister on the government’s planned amendments in the Income-tax Act. This move will certainly see infusion of positive sentiment in the industry at large, more so in the current environment. With the overarching intent of catalysing growth and investment, we anticipate positive impact for the Travel & Tourism sector, and with it a boost to our Corporate and MICE travel segments as well."

CP Gurnani, MD & CEO, Tech Mahindra, said, “The well-timed tax relief measures are a concrete step towards stabilizing the economy and bolstering investment. This will help spur growth and employment opportunities in key sectors.”

Thomas John Muthoot, Chairman and Managing Director, Muthoot Pappachan group said, “the Government's endeavor has been an integrated and multi-faceted approach. Announcing a series of measures to improve the liquidity leading to credit in the hands of the needy individuals, on one hand, and necessary & also substantial impetus to the overall economy growth, employment generation and foreign investment by slashing the corporate tax. We welcome these prompt and bold steps from the government and hope that it would help in lifting the market sentiments. It will thereby help corporates, especially NBFCs, to enhance the extent of benefits being delivered to the consumers and further empower the common man in fulfilling their needs and dreams. I am sure India would soon become a very attractive investment destination in the Asia region”.

“The lowering of corporate tax is a welcome move and will add much-needed fillip to the government’s Make in India initiatives as well as boost investment opportunities and job creation. This reiterates the government’s commitment towards bolstering the economy and spearheading growth towards the combined national vision of achieving a $5 trillion economy by 2025.” – Rajiv Bhalla, Managing Director, Barco India. We at Jaina welcome the government’s bold decision to reduce corporate tax for Indian companies. It is a boost to companies like us who are especially focused on the “Make in India” initiative and committed to the country's economic betterment. It will help us to divert more funds into such initiatives and that will surely benefit the economy as a whole,”
Pradeep Jain, Managing Director, Jaina Group.

Dr Niranjan Hiranandani - National President - NAREDCO and Founder & MD - Hiranandani Group
said, “as part of the process of averting an economic slowdown, Finance Minister announced reduction in Corporate tax rates, brought down to 22% for domestic companies and 15%for new domestic manufacturing companies along with other fiscal reliefs. It is a due corrective step by GoI to uplift investor’s sentiment and prompt investment back in drying up Indian economy. The move is well intended to revive growth traction of the economy. The fiscal stimulus announced is aligned with ‘Make in India’ initiative which shall further promote growth of manufacturing business domestically to help production and eventually impact the consumption. Rationalization of corporate tax sounds to induce more investments now by the corporates further being vital to turn around the economy, which was looming over extremely depressed market sentiments. The positive rally of investor bandwagon instantly reflected bullish in Indian Stock market by Sensex index surging up. This step puts Indian Corporate tax regime at par with South East Asian Countries, helping economic buoyancy to generate better revenue. India Inc. looks forward to a roller coaster festive season tax bonanza to ride the tide of positive sentiments. This positive sentiment will go long way in resurrecting dying economy, but we also hope that supertax on the individuals and HUF would also be further rationalised at 35% from currently obnoxious rate of 42% to uplift the end users spirit.”

Dayanand Agarwal, Managing Director of Agarwal Packers & Movers, DRS Group, said “This is fantastic move by the government in terms of providing much needed stimulus to economy. Reduction in effective corporate tax rate to about 25% means direct benefit in profitability for companies. The further lower base tax rate of 15% for new companies formed after Oct 1 is also a big positive step to boost investments. These measures would spur growth for companies and would enable them to make new capital investments. Private Capex cycle would get a real boost after the improvement in system’s liquidity. We believe that the overall logistics industry would see a huge positive growth in the coming period.”

Aditi Nayar, Principal economist, ICRA Ltd said, “we expect today's announcement to provide a big boost to business sentiment in the immediate term, with a modest knock on impact on consumption demand, particularly for big ticket items. However, the impact on fresh investment activity may be visible with a lag. Today's announcement would complement the expected further Repo rate cut in the October 2019 policy review. We continue to expect a 25 bps rate cut in the upcoming MPC review. While a fiscal slippage now appears inevitable given that the GoI's tax collections will fall substantially short of its budget estimates, expenditure cuts may still be required to prevent the fiscal deficit as well as G-sec yields from rising too sharply in FY2020. Additionally, lower Central tax collections will impact the state governments' fiscal situation as well through likely cuts in central tax devolution, and borrowing constraints may necessitate state government expenditure restraint or deferral. In light of the likely back ended pickup in investment activity and expenditure restraint that would be required, particularly at the state government level, we are not yet revising our FY2020 GDP forecast upward from 6.2%.” 

Prashant Solomon, MD, Chintels India and the Hon. Treasurer for CREDAI NCR, said “The announcements made by FM are a bold and positive step for the overall stimulation and growth of the Indian economy. The reduction of corporate tax will increase profitability for companies and at the same time could lower prices. It should also generate employment which will increase buying and will have a compounding effect across all sectors. This will boost manufacturing sector as new companies incorporated after October 2019 will now pay only 15% in taxes. For the Real estate sector this is an added benefit as it will encourage new entrants across the 200 ancillary industries that are essential to the sector’s growth. We applaud this bold move by the government.”

Dayanand Agarwal, Managing Director of DRS Dilip Roadlines, said “this is fantastic move by the government in terms of providing much needed stimulus to economy. Reduction in effective corporate tax rate to about 25% means direct benefit in profitability for companies. The further lower base tax rate of 15% for new companies formed after Oct 1 is also a big positive step to boost investments. These measures would spur growth for companies and would enable them to make new capital investments.” “Private Capex cycle would get a real boost after the improvement in system’s liquidity. We believe that the overall logistics industry would see a huge positive growth in the coming period.”

G. Radhakrishna, Chairman and Managing Director of RKEC Projects, said “The announcement of reduction in corporate tax rate is really a big positive move by the Government as this step would stimulate corporate earnings and would enable companies to make new capital investments. These measures were much needed by the economy in terms of boosting private capex cycle and consumption. The overall economy sentiments will turn positive with these announcements. We are very optimistic about the improvement in liquidity situation and picking up of tendering and bidding activities of infrastructure projects in the coming period. The capitalisation of Public Sector Banks and directives given by the Government to increase credit outflow to corporates should ease the liquidity stress in the market.”

Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE said, “the tax announcements made by FM minister is indeed a welcome measure and will definitely boost the Government’s ambitious Make in India program. Once the corporate tax rate of 22% for local companies and new tax rate of 15 % on companies formed after October 2019 comes into effect, investments are likely to surge in the manufacturing sector. The lower tax rates, shows the government’s commitment towards reigniting the economy’s growth engines and augurs well for the broad economy as well as entrepreneurs. Further the boost to the manufacturing ecosystem will not only generate jobs and lead to wealth creation but will also have cascading impact on other sectors including real estate and is likely to push demand for warehousing and commercial real estate space.”

Vinod Ramnani, Non-Executive Director of Opto Circuits, said “the announcement of reduction in corporate tax rate is a bold move by the Government. This was much needed by the economy to boost consumption and investment cycle. The overall sentiment of the market and corporate should lift and the economy should start showing some signs of recovery.” He further added that, “the liquidity situation should also improve after Government’s directives to PSU Banks and NBFCs to increase credit flow to corporates.”

Santosh Joshi, Founder & CEO of BankEdge, said “We welcome the government’s bold announcement of reduction in effective tax rate to about 25% for all companies. Moreover, lower base tax rate of 15% for new companies formed after Oct 1 is also a big positive step for getting the economy back on track. These steps will allow manufacturing and financial services sector companies to proceed with capex plans and credit growth. Profitability for companies will increase with lower taxes and would enable them eventually to make new capital investments. The overall improvement in sentiments and market liquidity to open the doors for more employment in banks and manufacturing companies. We believe that, we as a Banking & Finance Academy would benefit greatly with these announcements in the coming period.”

Siddharth Mehta, Founder and CIO of Bay Capital Partners, said, "The government tax cuts announced are likely to create an additional surplus in the hands of corporates which in turn will allow for additional liquidity of nearly $20bn in the short term. While this will lift corporate confidence and allow for greater investment and job creation, this is a forward looking and progressive reform by the government to ensure India is a fiscally attractive jurisdiction and shows a willingness of the government to forego near-term revenues to build a longer-term competitive global investment destination to attract foreign capital into India at a time when the world is facing a crisis of growth and negative interest rates. This along with the bank mergers is the most progressive policy move seen in decades and sends a clear message that Prime Minsiter Modi means business and is tackling the economic slowdown pro-actively and is literally taking the bull by its horns. I suspect there is more to follow.”

Vikas Vasal, Partner and National Leader – Tax, Grant Thornton India LLP said, “The reduction in the corporate tax rate is a significant move to boost investor confidence and revive business sentiment. With this, the government has addressed the key demand of businesses to align India’s corporate tax rate with the current economic reality where largest economies like the USA and the UK have taken similar measures to attract capital and investments. To give credit to the government, it is heartening to note that these rates have been announced now and that the government did not wait for the next budget. Hopefully, this should be followed by a similar tax rate reduction for individuals and other taxpayers soon as the festive season approaches. This would leave more money in the hands of the taxpayers, which in turn would boost overall demand and consumption in the economy.”
 
Ajit Mishra, Vice President Research, Religare Broking said, “The finance minister has finally taken strong measures to kick start the economy. The corporate earnings had worsened in the last few quarters mainly due to the ongoing slowdown. The cut in corporate tax rate would mean more income for corporates. This would have a direct positive impact on the EPS on all domestic companies. Further, this move along with the easing of enhanced surcharge has the potential to revive FII sentiments as well, as the corporate tax rate makes Indian companies more competitive in the global markets.”  
 
Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management said, We welcome the announcement by the Finance Minister.  This was a much needed measure, and clearly demonstrates the government’s commitment to rejuvenate domestic growth. With fiscal and monetary forces working in tandem, and meaningful big bang reforms being announced, alongside monetary easing, we believe the pervasive negative sentiment that exists today has bottomed and will begin to revive.  The markets will also deliver a positive wealth effect. The move in the markets will also deliver a positive wealth effect and will spur further financialisation, and engender efficient capital allocation.”
 
Jimeet Modi, Founder & CEO, SAMCO Securities & Stock Note said, This is yet another surgical strike on bears and negative sentiments in the economy which will create an environment of surplus in the hands of corporates for making further investments and ease their liquidity concerns. The reduction to 22% in corporate taxes will result in massive release of Rs 1,45,000 Crs immediately in the economy which will boost sentiments and bring in real surplus to the corporates. Companies in Consumer Finance, banks both Pvt and Public sector, Hotels all pay upwards of 32% tax will have maximum benefits, however rest of the sectors will have nominal positive impact. This is a path breaking move delivered by Modi 2.0 government in the interest of economy at the cost government exchequer in times of crises which will go down well in the history.”   

Madhu Sudhan Bhageria, Chairman of Filatex India, said “We welcome the announcement of reduction in effective corporate tax rate to about 25% as this would directly lead to big jump in profitability for manufacturing companies like us. Moreover, the lower base tax rate of 15% for new companies formed after Oct 1 is a again a great bold move to boost capital investments in private sector. These measures were much needed by the economy in terms of lifting private investments, consumption and overall sentiments.” He further said, “The reduction in taxes would ensure hundreds of billions of dollars in FDI and FII flows over the medium term. We are very happy that this would also enable to picking up the domestic demand for textile industry and thus consumption of our products like polyester yarns.”

Vijay Mansukhani, Managing Director of MIRC Electronics, said “The announcement of reduction in corporate tax rate is really a big positive move as this will enable manufacturing companies to make new capital investments. This will increase the profit margins and capital investments across the sectors. Base tax rate of 15% for new companies formed after Oct 1 is a big bold announcement steps to boost investments.” He further said, “The overall demand scenario would improve across sectors as the Government has directed public sector Banks and NBFCs to increase retail credit, the consumer spending during this festive season should increase, which should have good positive impact on consumer durables like LED Televisions, Air Conditioners and Washing Machines.”
 
Kewal Chand Jain, Chairman of Kewal Kiran Clothing, said that, “We welcome the announcement as the lowering of corporate tax rate would mean higher profitability and higher return on investments. This is really great move for across all sectors, as it would help in boosting private investments, consumption and overall sentiments. It’s a unique way to welcome Diwali by Government of India. He further said “As the announcement is a bold step with the perspective of pick-up in consumption and investments scenario, the demand for overall consumption would also see a positive growth in the coming period.”

Abhimanyu Sofat, Head of Research, IIFL Securities said that, the announcement made by FM, are expected to have maximum impact to improve market sentiment and address concerns of slowdown in the economy. Effective tax rate reducing to 25.17% will significantly improve profitability of full tax paying companies leading to change in roe leading to multiple re-rating. Reduction in MAT as well lower rate of tax for a new company which does investment in manufacturing till 2023 should lead to higher capex. Further, removal of enhanced surcharge on capital gains should be a big positive for investors. Though, the overall revenue loss of Rs1.45 lakh cr may be considered negative from the bond market perspective but we believe that getting the growth back should be a priority for the government.

Reducing corporate tax rate to 25% is big bang reform. Allows Indian companies to compete with lower tax jurisdictions like the US.  It signals that our government is committed to economic growth and supports legitimate tax abiding companies. A bold, progressive step forward, Uday Kotak, CEO, Kotak Mahindra Bank, said.

Ajay Bodke CEO PMS Prabhudas Lilladher said, in a major boost to revive flagging animal spirits & position India as one of the most attractive business destinations, government of India has announced a slew of measures that would act as a force multiplier for the flagging economic engine. By slashing corporate tax rate to 25% from 35% (22% from 30% without exemptions) for existing domestic companies & an extremely attractive rate of 15% for new companies setting up manufacturing operations after 1st October 2019 and commencing operations before 2023, government has rolled out a red carpet that would ensure hundreds of billions of dollars of FDI & FII flows over the medium term. Equity markets would rejoice as the multi-year cycle of earnings downgrade will finally come to an end. A significant valuation re-rating will follow as the market would start building in a virtuous cycle of upgrade in earnings trajectory over the medium-term due to both tax savings & boost in revenues due to perk-up in aggregate demand. The engine of domestic consumption will fire first followed by the investment engine on the back of corporates regaining their mojo. Incentives announced last week for export sector will also support the third engine of growth i.e. exports.

Acuité Ratings has been consistently reiterating the need for fiscal measures in the context of a significant slowdown in domestic and the global economy. The tax rationalization announcement by the FM today is in line with our expectations and along with the ongoing accommodative monetary policy, should help to revive the economy over the next few quarters. The liberal cuts of almost 10% on corporate tax rates for both existing and also new manufacturing companies would surely have an impact on the fiscal deficit for the current year. Acuité believes it will improve the climate for fresh private sector investments in the manufacturing sector that the economy has been long deprived of. Further, the removal of surcharge on capital gains will act to boost the sentiment of the equity markets and the FPIs, Suman Chowdhury, President - Ratings at Acuité Ratings & Research Ltd., said.

Vinod Subramanian - CEO, Logo Infosoft (irisVyapaari) said, “this is a welcome move as it will reduce the outflow to the companies and they can spend more on capacity expansion as well as on modernization leading into demand for the capital goods and increase in the GDP. It give a flip to the manufacturing industry which in turn helps the manufacturing sector to contribute to the GDP. An increase in the manufacturing activity means more employment and demand for the capital goods, steel, cement etc., which in turn will improve the GDP by putting the economy on the trajectory path. This will really attract companies which are planning to move out of China due the trade war between US and China. Companies have to do a cost benefit analysis either to avail the lower income tax rate or avail the various incentives /exemptions. This is one way of providing a level playing field for all the companies. In order to stabilise the flow of funds into the capital market, it is provided that enhanced surcharge introduced by the Finance (No.2) Act, 2019 shall not apply on capital gains arising on sale of equity share in a company or a unit of an equity oriented fund or a unit of a business trust liable for securities transaction tax, in the hands of an individual, HUF, AOP, BOI and AJP.”

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