The press conference of the GST Council organized by PIB at Fern Kadamba Resort in the north Goa had the highlights of the announcement made by India’s Finance Minister Ms. Nirmala Seetharaman about the tax reforms in the Indian Industry to give the new life to the business process in the country led to send the surge at the Mumbai Stock Exchange and the Sensex shoot up with 1100 points.
Union Finance Minister Nirmala Seetharaman announced that corporate tax has been slashed to 22% for domestic companies and 15% for new domestic manufacturing companies and other fiscal reliefs. In a press conference held at The Fern Kadamba, Ribandar, Goa, Seetharaman announced that the Government has introduced in the Taxation Laws (Amendment) Ordinance 2019 to bring about certain changes in the Income-Tax Act 1961 and the Finance (No.2) Act 2019.
The most important aspects of these amendments are as follows:
With effect from FY 2019-20, a new provision has been introduced in the Income Tax Act, which permits any domestic company an option to pay income tax at the rate of 22% on the condition that they will not avail of any exemption or incentive. The effective rate for these companies shall be 25.17% inclusive of surcharge & cess. Also, such companies shall not be required to pay Minimum Alternate Tax. This amendment has been introduced so as to promote growth and investment.
The second amendment, inserted in the Income-tax Act with effect from FY 2019-20 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. This change is expected to bring in new investments in the manufacturing sector as well as encourage the “Make in India” initiative of the Government.
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 the 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of the option, they shall be liable to pay tax at the rate of 22% and option once exercised cannot be subsequently withdrawn.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%.
The 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, Hindu Undivided Family (HUF), Association Of Persons (AOP), Body Of Individuals (BOI) and Artificial Juridical Person (AJP). This has been done to stabilize the flow of funds in the capital market.
There will not be any enhanced surcharge to capital gains arising on sale of any security including derivatives, in the hands of Foreign Portfolio Investors (FPIs).
It is provided that tax on buy-back of shares in case of such companies shall not be charged, in the case of listed companies which have already made a public announcement of buy-back before 5th July 2019, in order to provide relief to them.
The Government has also decided to expand the scope of Corporate Social Responsibility (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 Indian Council of Agricultural Research (ICAR), Indian Council of Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR), Department of Atomic Energy (DAE), Defence Research and Development Organisation (DRDO), Department of Science & Technology (DST), Ministry of Electronics and Information Technology] engaged in conducting research in science, technology, engineering and medicine aimed at promoting SDGs.
The total revenue was foregone for the reduction in corporate tax rate and other relief estimated at Rs. 1, 45,000 crores.