Don’t think there is much space for government to cut taxes, says Dhruva Advisors’ Dinesh Kanabar

Just days after the GDP growth in the third quarter slowed to its lowest level in over six years, finance minister Nirmala Sitharaman has defended the government in the Lok Sabha.

Responding to a debate on the bill to operationalize the cut in corporate tax rates, the finance minister said that the pace of growth will accelerate from the current 4.5 percent and cited the trajectory during the previous UPA regime.

She also responded to industrialist Rahul Bajaj's comments that an atmosphere of fear was prevalent among India Inc, saying this government is open to criticism. She went on to say, "If there is a government that listens, it is Prime Minister Modi's government".

The finance minister also clarified that the benefits of the minimum alternate tax (MAT) will be available to the industry starting this year. She moved an amendment to this effect, which effectively corrected a mismatch in the relevant clauses in between the ordinance and the original bill.

She also hinted that the government could consider a cut in personal income tax on merit. Dinesh Kanabar of Dhruva Advisors discussed the government's clarification on minimum alternate tax.

Kanabar said it’s positive that the government has recognized the error and issued a clarification.

He further said that earlier such quick corrections were not the norm.

Talking about further tax cut, he said, “the one place where government was planning to fill-up the fiscal deficit was disinvestment and if even that is put to a halt, I cannot see where will the government get the resources; are we going to get multiple dividends from Reserve Bank, where is the money going to come from to fill in the fiscal deficit.”

“I heard the FM talk about dozen-odd companies in USA expressing interest to relocate or move operations from China to India. Very-very welcome but those are long-term things; they are not going to start yielding income by way of direct or indirect taxes immediately. So there is pretty less room for maneuvering by the government there,” he added.