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Explained: How the latest corporate tax rate cut impacts the economy -Udit Misra

-The Indian Express

A cut in personal income tax or GST slabs would have spurred the economy more in the short term but the corporate tax cut is beneficial for the economy in the long term.

Finance Minister Nirmala Sitharaman’s announcement to cut corporate tax rates on Friday morning was a welcome surprise for the Indian economy that has been struggling with growth deceleration.

According to reports, the government has cut the corporate tax rate for domestic companies to 22 per cent (inclusive of all cesses and surcharges) for domestic companies from the existing 30 per cent. What’s more, new domestic manufacturing companies, incorporated after October 1, will be asked to pay only as little as 15 per cent rate provided they start manufacturing by 2023 – that is, a year before the next general elections.

The stock exchanges zoomed within minutes of the news because for most established companies the tax cut would immediately lead to a pro-rata increase in profits. Given that corporate profitability has been hit in the recent quarters, the movement on the exchanges signals hope of revival in corporate fortunes.

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