Bangalore Chamber of Industry and Commerce (BCIC) today commended the Union Government for accepting one of its key recommendations of reducing corporate tax rate to boost economic growth in the country. In a major reform measure, the Government today announced slashing of Corporate tax rates to 22 percent from 30 percent for domestic companies and 15 percent from 25 percent for new domestic manufacturing companies which is effective from April 1, 2019.
Mr. Devesh Agarwal, President, BCIC commending Finance Minister Smt. Nirmala Sitaraman said: “The important reform measure of reducing corporate tax has been a long standing demand of the Chamber and is a big ticket reform for India Inc. We are happy that the FM has accepted our recommendations and effected the crucial change. This, we believe will attract fresh Capex into manufacturing sector which will provide requisite boost to ‘Make-in-India’ initiative of the Government and also position India as one of the most attractive business destinations.”
The Government has also announced a new provision in the Income-tax Act with effect from FY 2019-20 which basically allows any new domestic company incorporated on or after 1st October 2019 making fresh investment in manufacturing, an option to pay income-tax at the rate of 15 percent. This benefit is available to companies which do not avail any exemption/incentive and commences their production on or before 31st March, 2023. The effective tax rate for these companies shall be 17.01 percent inclusive of surcharge and cess. These companies are also not required to pay Minimum Alternate Tax.
Mr. T R Parasuraman, Senior Vice President, BCIC lauding the FM said: “The new reform measures are laudable, especially when many Foreign investors are losing confidence due to several changing points in India like Euro IV to Euro VI in one go by 2020, accelerated electric mobility and stringent CAFE 2 norms by 2022. The announcement to reduce the corporate tax will be a big boost to assure Government’s strong intent to promote “Make in India” in true spirit and action. As Indian economy is largely driven by sentiments of people, the move from the Finance minister has come at the right time and is highly commendable.”
While Mr. K R Sekar, Vice President BCIC said: “The tax rationalisation measure announced by FM today will significantly help revive our economy over the next few quarters. The substantial reduction of almost 10 percent on corporate tax rates for both existing and new manufacturing companies would surely have an impact on the fiscal deficit for the current year, but then it will spur corporate boardrooms to take quicker investment decisions which in turn will have a huge bearing on new projects, employment generation and overall GDP growth. Further, the removal of surcharge on capital gains will act to boost the sentiment of the equity markets and the FPIs”.
He further said: “The benefit of lower rate of tax of 15 percent should be extended to all LLP and other forms of entity set up after specified date. Also the same should be extended for IT and other service companies too in addition to manufacturing”.
The Chamber feels that if the Union Government is able to fix a few more strategic reforms on fast track, the Indian economy will bounce back to its growth trajectory in the next few quarters.
FMs key takeaways for India INC.
· Slashes corporate tax for domestic cos, new local manufacturing companies
· Any domestic company gets an option to pay income tax at a rate of 22 per cent subject to condition that they will not avail any incentive
· Companies opting for 22 per cent income tax slab won't have to pay minimum alternative tax; effective rate will be 25.17 per cent including surcharges, cess
· New domestic manufacturing companies incorporated after Oct 1 can pay income tax at 15 pc rate without any incentives
· Effective tax rate for new manufacturing companies will be 17.01 per cent inclusive of all surcharge and cess
· Companies can opt for lower tax rate after expiry of tax holidays, concessions that they are availing now
· Enhanced surcharge introduced in Budget shall not apply on capital gain arising on sale of equity shares in a corporation liable for STT
· Super-rich tax not to apply on capital gains arising from sale of any security including derivatives in hands of FPIs
· Companies that announced buyback of shares prior to July 5 will not be charged with tax
· Total revenue foregone for reduction in corporate tax rate is estimated at Rs 1.45 lakh crore per year
· Tax concessions will bring investments in Make in India, boost employment and economic activity, leading to more revenue.