Auto Industry Reacts To Finance Minister's Proposal To Reduce Corporate Tax

The corporate tax rate has been reduced to 22 per cent from 30 per cent, while new manufacturing companies or companies will be taxed at 15 per cent.

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The Finance Minister has announced reduction in the corporate tax rate to 22 per cent.


  • FM has announced reduction in the corporate tax rate to 22 per cent.
  • New Companies will be charged at 15 per cent.
  • FM has also allowed corporates to expand their CSR expenditure.

While the big news for the auto sector from the GST council meet is still awaited, the Finance Minister, Nirmala Sitharaman, has made proposals which are likely to help reviving the struggling automotive sector. Before heading for the GST council meet, the Finance Minister has proposed reduction in the corporate tax rate to 22 per cent from 30 per cent and eliminated the minimum alternate tax for companies that are not availing incentives under the income tax act. Moreover, new manufacturing companies or companies which are making fresh investments from October 2019 will be taxed at 15 per cent instead of 25 per cent which was charged earlier. The new rates are effective from April 1, 2019 (current financial year) and advance taxes which have been paid will be adjusted in the next payment.

Also Read: GST Fitment Committee Opposes Tax Rate Cut On Automobiles

Commenting on the announcement, Rajan Wadhera, President- Society Of Indian Automobile Manufacturers and President- Automotive Sector, Mahindra said, "The reduction of corporate tax to 15 per cent for new companies making fresh investments from 1st October 2019, will support investment and also FDI in the auto sector. This is expected to give a big boost to Make in India for automobile industry."

Speaking on similar lines, President ACMA, Deepak Jain, said, "The announcement made by Hon'ble Finance Minister is indeed heartening and reassuring. Reduction in Corporate tax to 22 per cent for existing companies, 15 per cent for new manufacturing companies and relief on account of MAT are steps in the right direction to give manufacturing, investments and economic activity a boost. The measures will also put India in the league of competitive economies in the world."

Martin Schwenk, Managing Director & CEO, Mercedes-Benz India said, "Reduction in corporate tax to 22 per cent is a shot in the arm as it is directly correlated to economic growth. Reduction of corporate tax has been on the agenda and it will also boost 'Make in India initiatives. It will promote investment, help sustain profitability during challenging times and should also improve buying sentiments, thus helping the auto sector in long term."

Shekar Viswanathan, Vice Chairman and Whole-time Director, Toyota Kirloskar Motor Said, "As announced by the Honorable Finance Minister of India, we are pleased to note that the corporate tax rate for large domestic companies has been slashed from 30% to 22% without incentive or exemption and that of new local manufacturing companies in India has been further lowered to 15% without incentive or exemption. It is also welcome that Minimum Alternative Tax (MAT) will not be applicable when adopting corporate tax under this new provision. This is a welcome structural change and comes as a great respite to corporates. This positive move from the Government of India will lead to further investments in the country as well as create more business opportunities. The 'Make in India' initiative will thus get a further impetus."

Nishant Arya, Executive Director, JBM Group said, "JBM Group welcomes the government's bold decision. The recent announcement by the finance minister aimed to bring structural reforms in the economy by lowering the corporate tax will help in uplifting the market. It comes at the right time to capture the slowdown. These measures will not only positively impact the revenues but will also strengthen India's stand globally and promote fresh investment."

Also Read: Need Uniform GST Rate Of 18% For All Components: ACMA President


The Finance Minister has also allowed corporates to expand their CSR expenditure to include public incubation centers and educational institutions like the Indian Institute Of Technology (IIT) for R&D activities. The move will encourage auto companies to work with aspiring professionals and will provide students the opportunity to conduct research activities with sufficient funds which in-turn will help them to get hands on training. Carmakers like Toyota and MG Motor are already working with IIT students and the announcement is likely to attract more automakers. Moreover, companies like Maruti Suzuki, Mahindra, Tata Motors, and Bajaj have also been hiring from IIT and other engineering colleges. The move will also help in streamlining the process if students will be working with the companies.

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