Goa: The government on Friday cut corporate tax rate for companies that do not avail of any tax incentive to 22%. Effective corporate tax rate after surcharge will be 25.17%.
New manufacturing companies will have to pay an even lower corporate tax rate of 15%.
Finance minister Nirmala Sitharaman told reporters here that an Ordinance has been cleared earlier in the day giving effect to the amendments to the Income Tax Act. The tax relief is part of steps the government has been announcing after consultations with the industry, on a weekly basis, to deal with the slowdown, the minister said.
Sitharaman said the government was aware of the consequences of the revenue outgo that would happen due to the tax measures announced today, adding that the Centre will lose an estimated ₹1.45 trillion.
“This set of amendments are being brought about in taxation laws through an Ordinance which we have been passed only a few minutes ago. To promote growth, a new provision is inserted in the Income Tax Act from fiscal year 19-20 to give any domestic company a 22% corporate tax rate subject to the condition that they will not avail any exemptions or incentives," said Sitharaman. The minister said the effective tax rate for these companies is 25.17% inclusive of all surcharges and cess.
At present, business income is taxed at 30%, exclusive of cess and surcharge, other than the companies with sales of up to ₹400 crore, and new manufacturing companies which are taxed at 25%.
The tax rate cuts may encourage businesses to invest more at a time economic growth rate has slowed down to a six-year low of 5% in the June quarter.
The minister said, to attract fresh investment in manufacturing activities and to give a boost to the ‘Make in India’ drive, another provision has been included in the Income Tax Act to tax any new domestic company incorporated on or after 1 October 2019 and making fresh investments in manufacturing an option to pay a tax of 15%, the minister said. “This benefit is available to companies that do not avail of any tax incentives and commence production on or before 31 March 2023," said Sitharaman.
The effective tax rate for new companies will be 17.01% inclusive of all surcharge and cess.
She added that listed companies which had announced share buybacks before 5 July, the day the Union Budget brought share buybacks under the tax net, will be exempt from buyback tax. The government has also cut the minimum alternate tax rate to 15% from 18.5% for companies that continue to avail exemptions and incentives.
The government also rolled back an increase in surcharge introduced in the July budget on capital gains made by individuals and other entities from sale of equity.
Companies that do not avail of the concessional tax regime will continue to pay tax at the pre-amended regime. They can opt for the concessional tax regime after the end of the tax holidays or the exemption period that they currently avail.
Revenue secretary AB Pandey explained that businesses that currently enjoy a tax rate below 22% on account of the tax incentives that they avail of can switch to 22% rate after the incentives expire.
No comments:
Post a Comment