Impact of corporation tax cut will be visible after two years: CII chief

The revised corporate tax rates are competitive and its impact will be visible in the next two years, industry body CII's President Vikram Kirloskar said on Tuesday as he emphasised that the government listened to the industry "word by word" on lowering rates.

He said the industry pushed the government a lot for reducing the rates.

"For me, it was a surprise (when the government in September announced the significant cut in tax). I felt really good. I felt that they have listened to us. Very frankly and they listened 'word to word'," Kirloskar said.

He spoke to PTI after a pre-Budget meeting with Finance Minister Nirmala Sitharaman that was attended by him and representatives of other industry organisations.

 

When asked if the industry was looking for further reduction in tax rates, he replied in the negative.

"No. I think it is competitive. I know people who are looking at investing either in Thailand, Indonesia, or India have now got India back in the game. I think you will see the results in next two years," he said.

In a major fiscal booster, the government, in September, slashed effective corporate tax to 22 per cent for domestic companies.

Also, companies opting for 22 per cent income tax slab would not have to pay Minimum Alternate Tax (MAT) and new domestic manufacturing companies incorporated after October 1, can pay income tax at a rate of 15 per cent without any incentives.

However, companies are facing a dilemma that if they opt for the lower tax rate, they would have to forego accumulated MAT credits.

"I think they (the government) have done it very wisely by saying you have an option of X or Y. Because when we pushed for lowering rates, one of the issues was that there are people with (MAT) credits available," he said.

About sluggish GDP growth, he said the slowdown in the economy was a combination of several factors.

"In the last 5-6 years, it has been pretty good. It (the slowdown) is cyclical as well as structural, both. It is too complex a situation to simplistically explain I think... we will have to do some restructuring of ourselves to get back to that same track," Kirloskar said.

He is also the Chairman and Managing Director of Kirloskar Systems Ltd, and Vice Chairman of Toyota Kirloskar Motor.

India's GDP growth fell to an over six-year low of 4.5 per cent amid slowing demand despite five rate cuts by the Reserve Bank.

Kirloskar said industry associations had a good meeting with the minister.

"The main point is... may be re-look at the Budget deficit, expand the fiscal policy a little bit and then come back to the normal track and spend extra money on infrastructure upfront," he said.

The industry body also mentioned about delayed payments to companies from the public sector units.

On why the associations did not press for income tax reduction during the meeting, he said it may be because the stress was on other issues to push economic growth.

Meanwhile, Kirloskar said CII has asked its members to prioritise payments to the Micro, Small and Medium Enterprises (MSME) sector.

When asked what impact the protests across the country in the wake of amendments to the citizenship law, Kirloskar said as an association CII pushes for economic agenda.

"I think individually people definitely get concerned about these issues... may be privately people discuss it but definitely as an association we don't discuss it," he said.

On impact of protests on overseas investors, he said foreign investors do risk evaluation of a country.

"Typically they are very pragmatic and realistic in doing that risk evaluation... you see results in the numbers finally... money coming in or not," he said.