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NEW DELHI: In her maiden Budget in July, finance minister Nirmala Sitharaman had lowered the corporate tax rate for most companies but excluded the biggest. "We shall cover them sooner," she had said.On Friday, in her fourth phase of post-budget economic stimulus measures, Sitharaman cut base corporate tax for existing companies to 22% from the current 30% and for new manufacturing firms, incorporated after October 1, 2019 and starting operations before March 31, 2023, to 15% from the current 25%. The companies in the respective categories can opt for the lower tax if they don't avail exemptions and incentives.The sharp cut brings India's corporate tax rate on par with the global average of 23.79% and closer to the Asian average of 21.09%. The move will also help pitch India as a manufacturing destination to companies looking for alternatives to China.Last week, Thailand cut its corporate tax rate to 10% for factories that relocate from China. The 15% tax for new manufacturing firms in India compares favourably with countries like Vietnam (20%).Five consecutive quarters of slowing growth saw India losing its status as the fastest-growing major economy to China this year.The GDP growth rate slowed down to a six-year low of 5% in the June quarter. India's stock markets were also on course towards the biggest quarterly exodus since at least 1999, with foreign funds having dumped a net $4.9 billion worth of stocks since June.A lower rate will make big companies more competitive (the combined tax liability of companies in higher tax bracket is likely to reduce by Rs 45,000 crore) compared to their global peers and leave them with more cash to invest and expand their businesses. This would lead to more job creation and better income growth, which will give a boost to the economy.Lower taxes will also improve the valuation of companies that could drive the sentiment in the stock market. A lower capital gains tax on listed equities (the surcharge imposed in the budget has been withdrawn) will prompt more Indians to invest in the stock market and help counter the foreign fund outflows. Stock markets celebrated the announcement with the biggest rally in 10 years as sensex rallied 1,921 points, the biggest single-day gain since May 2009.The Centre will lose an estimated Rs 1.45 lakh crore in revenue due to the tax cuts. That could also mean a bigger hole in government's finances. Experts say that the government is likely to run a fiscal deficit higher than the 3.3% of GDP it has budgeted for. If the government attempts to counter this through spending cuts, it may hurt the economy.A higher shortfall in government finances could mean the need to borrow more and leave less for the private sector. However, divestment offers another way of raising money. The government is also expected to recoup some of the revenue lost in the form of higher-than-budgeted dividends likely to be passed on by public sector companies if they show stronger profits.Unlike the economic package after the global financial crisis (2008-09) that was aimed at increasing spending and boosting consumption, the benefits from this one will come to consumers through companies. More profits could allow companies to cut prices of their products to boost sales during the slowdown. Some companies may offer dividends to their investors.However, the speculation in the market is that the government may announce measures on income tax next to boost consumer sentiment and demand. The task force on direct taxes had recommended a reduction in top rates of both corporate and income tax.The GST Council, meanwhile, decided not to cut rates on automobiles but made hotel stays cheaper. GST rate on hotels charging above Rs 1,000 a night and up to Rs 7,500 has been cut from 18% to 12% and for those charging above that the rate has come down from 28% to 18%. The only reduction announced for automobiles was a lower cess component for 11- to 13-seater mini buses.