Corporate tax cut: Nirmala Sitharaman finishes what Arun Jaitley started

Finance Minister Nirmala Sitharaman announced a cut in corporate tax rates to 22 percent for existing domestic companies and 15 percent for new domestic manufacturing companies through an ordinance on September 20. The effective corporate tax for domestic companies will become 25.17 percent, including surcharge and cess and without exemptions
In his 2015 budget speech, former Finance Minister Arun Jaitley proposed that the rate of corporate tax would be brought down from 30 percent to 25 percent over the next four years. Jaitley said that the high corporate tax rates, accompanied by too many exemptions, were hurting both revenues and investments.
With her latest announcement on corporate tax rate cuts, Sitharaman has implemented Jaitley's 2015 proposal.
The earlier 30 percent rate of corporate tax in India was higher than that in other major Asian economies, a factor that was hurting the domestic industry.
Previously, companies were also required to pay a minimum alternate tax (MAT) at 18.5 percent on book profits. Sitharaman has reduced MAT to 15 percent from 18.5 percent for companies that continue to avail exemptions. However, companies that choose the 22 percent corporate tax slab will not have to pay the MAT.

The relaxation in these corporate tax rates dates back to P Chidambaram’s "Dream Budget" proposed in 1997. In times of economic uncertainties, the-then Finance Minister Chidambaram also slashed corporate tax rates to enable growth. He introduced MAT in 1996 but, in 1997, he got corporation tax down to 35 percent from 40 percent. Royalty rates and surcharge were also brought down. He said, "Our goal must be to achieve rapid and broad-based growth which alone can ensure higher employment, better living standards and a humane and just society.”
Arun Jaitley proposed the idea in 2015 saying that tax reduction would lead to a higher level of investment and growth along with more jobs.
Apart from that, Sitharaman's announcement has given a boost to the local manufacturing companies incorporated on or after October 1 by levying tax at the rate of 15 percent to attract investment in the sector. All domestic companies will also include foreign joint ventures with Indian companies
Corporation tax rate reduction announcements in both 1997 and 2019 have left the markets rallying.