Government Removes Sectors from 15% Corporate Tax Slab

The Finance Ministry has made it clear that mining, software and three other sectors are not eligible for the 15% corporate tax rate. It has been made clear that only new manufacturing businesses qualify for the 15% corporate tax rate. The ministry clarified on Monday.

Furthermore, the government said that the losses occurring due to the merger and consolidation would not be accounted while calculating 22% corporate tax for the already existing companies. All these are a part of the new Taxation Laws Bill that will displace the ordinance published in September 2019.

The new Taxation Laws Bill now contains the requisite subsections and provisions. The most significant one is the amendment to 115JAA, which now says that crediting the minimum alternate tax (MAT) will not be available if the beneficial tax rate is already claimed.

Also Read: Can Corporate Tax Cuts Revive the Indian Economy?

The new Taxation Laws Bill was introduced to the Lok Sabha on Monday. The Bill is presented to clarify that software development, cylinder bottling, mining, conversion of marble stones to slabs, and printing books and cinematographic film are not considered as a manufacturing business.

An announcement was made on 20 September 2019 to attract new investments towards India in the field of manufacturing. As per the notification, new domestic companies making fresh investments in manufacturing and being incorporated after 1 October 2019 will have a choice of paying the income tax at the rate of 15%.

The announcement was made with the view of boosting the initiative of ‘Make-in-India’. This benefit of paying 15% tax is available to businesses that do not make use of any incentive or exemption. Also, these companies must start their production before 31 March 2023.

These companies would pay tax at an effective rate of 17.01%, which includes cess and surcharge. Furthermore, these businesses are not needed to pay MAT. As per the announcement made on 20 September 2019, the highest corporate tax rate for the domestic companies is now 22%, which is reduced from 30%.

For any clarifications/feedback on the topic, please contact the writer at vineeth.nc@cleartax.in

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