FM Nirmala Sitharaman introduces Bill in Lok Sabha to cut corporate tax

Finance Minister Nirmala Sitharaman on Monday introduced Taxation Laws (Amendment) Bill, 2019, in Lok Sabha to replace Ordinance that was used to slash corporate tax rate to stimulate growth rate in a slowing ecomy. Taxation Laws (Amendment) Bill, 2019 will replace Taxation Laws (Amendment) Ordinance, 2019, promulgated on September 20, 2019, to cut base corporate tax rate to 22 per cent from 30 per cent.

Sitharaman introduced Bill just before proceedings in Lok Sabha were journed for day following opposition uproar over political developments in Maharashtra. Also, International Financial Services Centres (IFSCs) Authority Bill, 2019, that provides for creation of a unified financial regulator for IFSCs was introduced amid a din over Maharashtra developments.

Sitharaman h on September 20 anunced lowering of base corporate tax rate to 22 per cent from 30 per cent for companies that do t seek exemptions, and reduced rate for some new manufacturing companies to 15 per cent from 25 per cent. Including surcharges and cesses (levies to raise funds for specific purposes), effective corporate tax rate will drop by nearly 10 percent points to 25.2 per cent.

corporate tax cut follows or measures by government to prop up slowing GDP growth opted since May general elections. se include efforts to reduce red tape and boost foreign direct investment (FDI), and plans to consolidate state-owned banks.

As Parliament was t in session and re was a need to provide fiscal stimulus to attract investments, generate employment and boost ecomy, President of India, in exercise of powers under Article 123(1) of Indian Constitution, h promulgated an Ordinance to make certain amendments to Income Tax Act, 1961.

As per constitutional process, an Ordinance promulgated under Article 123(1) has to be laid before both Houses of Parliament and shall cease to operate at expiration of six weeks from reassembly of Parliament; or if before expiration of above period, resolutions disapproving Ordinance are passed by both Houses, on date on which resolutions are passed.

Besides reduction in corporate tax rates for existing and new domestic companies, Ordinance also implemented withdrawal of higher surcharge for n-corporates on certain capital market transactions anunced earlier on August 24, 2019, and also provides relief from buyback tax for listed companies in respect of buybacks which were publicly anunced prior to Budget anuncement on July 5, 2019.

Faltering domestic demand, weak global tre environment, asset-quality challenges at banks and funding pressure on n-banking financial companies have contributed to ecomic slowdown. Gross domestic product (GDP) growth slowed for a fifth consecutive quarter in April-June to 5 per cent, slowest pace in six years.

International credit rating ncies have cut India's GDP growth forecast for 2019-20 prounced slowdown due to long-lasting factors. finance minister also produced International Financial Services Centres Authority Bill, 2019. Bill provides for establishment of International Financial Services Centres Authority.

Authority will consist of nine members, appointed by central government. Members of Authority will include four members to be minated from Reserve Bank of India (RBI), Securities Exchange Board of India (Sebi), Insurance Regulatory and Development Authority of India (Irdai), and Pension Fund Regulatory and Development Authority besides chairperson.

Authority will regulate financial products, financial services, and financial institutions in an IFSC which have been approved by any regulator (such as RBI or Sebi), before enactment of Bill; regulate any or financial products, services, or institutions in an IFSC, which may be tified by central government; and recommend to central government, any or financial services, products, or institutions which may be permitted in an IFSC.

Union Cabinet in a meeting held on February 6 h approved proposal for establishment of a unified authority for regulating all financial services through introduction of International Financial Services Centres Authority Bill 2019 in Parliament. Subsequently, Bill was introduced in Rajya Sabha on February 12, 2019.

withdrawal from Rajya Sabha has been necessitated as Lok Sabha Secretariat has w conveyed that this is a Finance Bill under Article 117(1) of Constitution which should be introduced in Lok Sabha accordingly with recommendation of President under Article 117(1) and 274(1) of Constitution. Currently, banking, capital markets and insurance sectors in IFSCs are regulated by multiple regulators i.e. RBI, Sebi and Irdai.