GST COUNCIL DECISIONS ON CORPORATE TAX
Corporate tax rates slashed to 22% for domestic
companies and 15% for new domestic manufacturing companies and other fiscal
reliefs
The Government has brought in the Taxation Laws (Amendment) Ordinance
2019 to make certain amendments in the Income-tax Act 1961 and the Finance (No.
2) Act 2019. This was announced by the Union Minister for Finance &
Corporate Affairs Smt Nirmala Sitaraman during the Press Conference in Goa
today. The Finance Minister elaborated further , the salient features of
these amendments , which are as under:-
a. In order to
promote growth and investment, a new provision has been inserted in the
Income-tax Act with effect from FY 2019-20 which allows any domestic company an
option to pay income-tax at the rate of 22% subject to condition that they will
not avail any exemption/incentive. The effective tax rate for these companies
shall be 25.17% inclusive of surcharge & cess. Also, such companies shall
not be required to pay Minimum Alternate Tax.
b.In order to
attract fresh investment in manufacturing and thereby provide boost to
‘Make-in-India’ initiative of the Government, another new provision has been
inserted in the Income-tax Act with effect from FY 2019-20 which 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%. 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% inclusive of
surcharge & cess. Also, such companies shall not be required to pay
Minimum Alternate Tax.
c. A company
which does not opt for the concessional tax regime and avails the tax
exemption/incentive shall continue to pay tax at the pre-amended rate. However,
these companies can opt for the concessional tax regime after expiry of their
tax holiday/exemption period. After the exercise of the option they shall be
liable to pay tax at the rate of 22% and option once exercised cannot be
subsequently withdrawn. Further, in order to provide relief to companies which
continue to avail exemptions/incentives, the rate of Minimum Alternate Tax has
been reduced from existing 18.5% to 15%.
d. In order to
stabilise the flow of funds into the capital market, it is provided that
enhanced surcharge introduced by the Finance (No.2) Act, 2019 shall not apply
on capital gains arising on sale of equity share in a company or a unit of an
equity oriented fund or a unit of a business trust liable for securities
transaction tax, in the hands of an individual, HUF, AOP, BOI and AJP.
e.The enhanced
surcharge shall also not apply to capital gains arising on sale of any security
including derivatives, in the hands of Foreign Portfolio Investors
(FPIs).
f. In order to
provide relief to listed companies which have already made a public
announcement of buy-back before 5th July 2019, it is provided
that tax on buy-back of shares in case of such companies shall not be charged.
g.The
Government has also decided to expand the scope of CSR 2 percent spending. Now
CSR 2% fund can be spent on incubators funded by Central or State Government or
any agency or Public Sector Undertaking of Central or State Government, and,
making contributions to public funded Universities, IITs, National Laboratories
and Autonomous Bodies (established under the auspices of ICAR, ICMR,
CSIR, DAE, DRDO, DST, Ministry of Electronics and Information Technology)
engaged in conducting research in science, technology, engineering and medicine
aimed at promoting SDGs.
The total revenue foregone
for the reduction in corporate tax rate and other relief estimated at Rs.
1,45,000 crore.