New Delhi: Parliament on Thursday approved the Taxation Laws (Amendment) Bill, 2019 that replaces an ordinance promulgated to cut the base corporate tax rate, with Finance Minister Nirmala Sitharaman stating that mining companies, software developers and book printers will not be eligible for the lower 15 per cent rate available for new manufacturing companies.
Lok Sabha had earlier this week passed the bill and the Upper House returned it on Thursday without making any changes.
Replying to a debate on the legislation, Sitharaman said a negative list of activities that do not constitute manufacturing has been created and will not be eligible for the lower 15 per cent tax rate for manufacturing firms that are set up after October 1 and that begin operations by 2023.
The negative list includes the development of computer software in any form or in any media, mining, conversion of marble blocks or similar items into slabs, bottling of gas into cylinder, the printing of books or production of a cinematograph film. Sitharaman had on September 20 announced lowering of the base corporate tax rate to 22 per cent from 30 per cent for companies that do not seek exemptions, and reduced the rate for new manufacturing companies to 15 per cent from 25 per cent.
Including surcharges and cesses (levies to raise funds for specific purposes), the effective corporate tax rate will drop by nearly 10 percentage points to 25.2 per cent for corporates in general and 17.01 per cent for new manufacturing companies.
The corporate tax cut followed other measures by the government to prop up slowing GDP growth adopted since the May general elections. These include efforts to reduce red tape and boost foreign direct investment (FDI), and plans to consolidate the state-owned banks.
The finance minister said the reduction in corporate tax was done to make India an attractive destination for firms looking to invest outside of the US and China following their trade tensions. A lower rate of 15 per cent was offered for new manufacturing units to draw new investment, thus reviving economic activity and creating jobs, she said.
Sitharaman also promised to continue the rollout of reforms to boost the economy.
GDP growth rate in July-September slowed to a six-year low of 4.5 per cent on a slump in manufacturing and drop in consumer demand.
Parliament okays corp tax cut; FM says software developers, miners not eligible for lower rates