In a bid to revive the stagnant economy finance minister Nirmala Sitharaman announced corporate tax rate cuts earlier this month. Dilip Piramal, chairman of VIP Industries in an interview with CNBC-TV18, talked about profit growth due to the central government's measures.
Speaking about tax cut and its implication Piramal said, “This is the best thing happened to us because we were paying the maximum tax rate. [For a] company like us which is consumer goods company, [there is] not much capital investment so we were taxed at maximum 25.7 percent or something, so our net profit will go up by 10 percent straight away.”
He added: “I have been saying this for the last 30 years that marginal tax rate should be always lower because it also reduces advantage of tax evasion. There are lot of tax evaders in our country. The cost of tax evasion in a way goes up because the benefit is less.”
Piramal, however, said that prices of products will be determined by market forces.
“The market mechanism takes care of all these things. Even when goods and services tax (GST) was introduced and the government has so much of emphasis on — that you should not make any extra or windfall profit for anything that the benefit should be passed on, so that is only a very short term thing. The benefit can be passed on for two or three months but ultimately it is the competition in the market, the market mechanism takes care of all these things.”
On consumer demand during the ongoing festive season, he said: “First quarter wasn’t so bad, it was weak but we had 12 percent growth as against 25 percent growth the last year. Second quarter has been weaker but August and September are the weakest months in the entire year. There is a shradh period in September and August also is lean. I don’t want to say anything about the quarter.”
He added: “This government has been very responsive. Even in the GST they first levied 28 percent GST on a lot of products, including ours. They did that to play safe, they did not want to lose revenue. Within 4-5 months they realised that this 28 percent was excessive and they brought down 80 percent of these items which were under 28 percent GST tariff rate to 18 percent. Even otherwise this government is very responsive.”