As per the reports, the government has slashed the corporate tax rate for domestic companies to 22% (inclusive of all surcharges and cess) from the existing 30% and the effective corporate tax rate would be 25.17%. It was also announced that for new manufacturing companies set up after October 1, 2019 and commencing their operations by March 31, 2023, the effective tax rate will be reduced to 17% from the existing 29.1%. This corporate tax cut, introduced through promulgation of an ordinance, is certainly a bold move by the government to attract more investments into the country. Keeping in mind the demands of corporate houses and the competitive tax rates in other East Asian countries, the Indian government has decided to lower the corporate tax rate for the first time in 45 years, hoping to revive the domestic manufacturing sector. But, what was the intention behind this gamble and what will be its implications?
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