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Saturday 4 July 2020

Companies fleeing China to come to India: At least 300 out of 1,000

Companies moving out of China and setting up factories in India find the democratic country's tax regime more attractive than ASEAN alternatives'

About 1,000 companies operating in China are now looking for opportunities in India amid the raging coronavirus disease (COVID) pandemic in the world, whose outbreak in Wuhan of the Hubei province had devastated the supply chains even though Beijing could keep the virus from reaching its industrial hub Shanghai. Further, “companies are moving out also because the belief that China unleashed the biological agent on purpose to dominate the world economy has unnerved the private sector, which fears it could be the next target of the unethical communist regime,” said an Indian businessman with business interests in China on the condition of anonymity.

According to a Business Today report, foreign companies in China are facing a lot of problems due to the corona virus. In this environment, about 1,000 foreign companies are thinking of entering India. Nearly 300 of these companies are in a mood to set up a factory in India. Negotiations are also going on with government officials in this regard.

A Central Government official gave information about this. According to her, “Currently about 1000 companies are negotiating at different levels. Out of these companies, we have targeted 300 companies. The situation will be better for us once the coronavirus comes under control. India will emerge as an alternative manufacturing hub.”

The targeted 300 companies are active in the fields of mobile device manufacturing, electronics, medical devices, textiles and synthetic fabrics and now want to come to India. If there is positive response from the government, it will be a big shock for China that faces the loss of reputation of being the manufacturing hub of the world.

The Narendra Modi government has been enticing foreign investors with policy decisions like a drastic reduction in corporate tax a sub-ASEAN level of 25.17%. For those who set up new factories, this tax has been reduced to 17%. This is the lowest in south-east Asia.

State companies are vying to get FDI moving out of China too.

The government has given relief in Minimum Alternate Tax (MAT). Companies now have to pay MAT at the rate of 15% instead of 18.5%. Actually, MAT is levied on companies that earn profits but due to concessions, the tax liability on them is reduced. The MAT introduced in India by the Finance Act of 1987, vide Section 115J of the Income Tax Act, 1961 (IT Act), to facilitate the taxation of ‘zero tax companies’ i.e., those companies which show zero or negligible income to avoid tax.

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