The auto industry body, Society of Indian Automobile Manufacturers (SIAM) on September 20 has said the reduction in corporate tax rate and other announcements made by Finance Minister Nirmala Sitharaman would help give a boost to local manufacturing in the sector. The government slashed effective corporate tax to 25.17 percent inclusive of all cess and surcharges for domestic companies. Making the announcement, Sitharaman said the new tax rate will be applicable from the current fiscal which began on April 1.

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Investment and FDI in the auto sector

"The reduction of corporate tax to 15 per cent for new companies making fresh investments from October 1, 2019, will support investment and also FDI (Foreign Direct Investment) in the auto sector. This is expected to give a big boost to Make in India for the automobile industry," Society of Indian Automobile Manufacturers (SIAM) President Rajan Wadhera said in a statement.

Expansion of scope of CSR (corporate social responsibility) expenditure to include incubation centres and R&D (Research and Development) activities will also help with expenditure in the automobile sector, he added.

"All these set of fiscal measures are expected to uplift market sentiments and improve demand for automobiles," Wadhera said. 

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Automobile Industry sees the worst month in two decades

India’s passenger vehicles (PV) industry suffered its worst-ever performance in two decades as a demand slowdown showed no sign of abating. Domestic sales of passenger vehicles plunged by 31.6% in August, down to 1,96,524 units, from last year, according to data released by the Society of Indian Automobile Manufacturers (SIAM). It was the 10th straight decline in domestic passenger vehicle sales and the worst in the history of SIAM’s compilation of monthly sales data since 1997-98. 

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Highlights of announcements made by Nirmala Sitharaman

• The corporate tax rate has been slashed to 22 per cent for domestic companies not availing any incentives/exemptions; earlier rate 30 per cent.
• New domestic companies incorporated on or after Oct 1, 2019, making fresh investment in manufacturing can pay income-tax at a rate of 15 per cent; the earlier rate was 25 per cent.
• Such companies shall not be required to pay Minimum Alternate Tax (MAT).
• Enhanced super-rich tax on capital gains on the sale of share in hands has been removed.
• Revenue foregone for reduction in corporate tax and other relief is estimated at Rs 1.45 lakh crore.
• No tax on buyback of shares if companies have made an announcement regarding it before July 5 2019.
• Scope of corporate social responsibility (CSR) activities have been expanded.

READ | PM Modi hails big corporate tax cut as a 'stimulus to Make in India'

READ | Government: Corporate tax cut to cost exchequer Rs. 1.45 lakh crore

(With Inputs from PTI)