Finance Minister Nirmala Sitharaman’s big-bang corporate tax cut announced is set to have a substantially beneficial impact on the struggling auto sector, experts say, giving makers space to cut prices and boost demand. The sector, which contributes a whopping 7.5 per cent to the country’s overall gross domestic product (GDP), has been impacted by ten consecutive months of declining sales.
Sitharaman announcement brought down corporate income tax rates to 25.1 per cent with complete exemption from minimum alternate tax from the earlier effective tax rate of between 29.12 and 34.94 per cent.
According to ICRA, the cut will boost the investment resulting in a positive impact on overall economic activity. “In particular, the auto industry, which accounts for about half of India’s manufacturing GDP, is likely to be one of the key beneficiaries of the corporate tax revision,” it said.
ICRA VP Pavethra Ponniah said with such weak demand, automakers are expected to pass on some benefits to end consumers.