Finance Minister Nirmala Sitharman said the lower 15 percent tax rate for new manufacturing companies will not apply to computer software development, mining and printing of books.
She was replying to a debate in the Rajya Sabha on the Taxation Laws (Amendment) Bill, 2019 that replaces the Taxation Laws (Amendment) Ordinance, 2019, promulgated on Sept. 20, 2019, to cut the base corporate tax rate.
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The amendment carries a negative list of industries that will not qualify for lower tax rate meant for manufacturing companies set up on or after Oct. 1, 2019 but that begin production before 2023, she said.
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The negative list includes computer software development, mining and printing of books as they are not manufacturing per se, the minister added.
Sitharaman had on Sept. 20 announced lowering of the base corporate tax rate to 22 percent from 30 percent for companies that do not seek exemptions, and reduced the rate for some new manufacturing companies to 15 percent from 25 percent. 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 percent.
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, and plans to consolidate the state-owned banks.
She said the objective of providing a lower 15 percent corporate tax rate for new manufacturing units was to draw new investment.
New manufacturing companies have been given the option to move to the higher 22 percent tax bracket if they fail to satisfy conditions meant for availing lower rates, she said.
Sitharaman also promised to continue rollout of reforms to boost the economy. GDP growth rate in July-September slowed to a six-year low of 4.5 percent.
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