FM: Tax cut aimed at attracting investment, generating jobs

Finance Minister Nirmala Sitharaman in the Lok Sabha on Monday said that the government's decision to reduce corporate tax rate was aimed at attracting investment and creating jobs.

The government's decision was also necessary to attract investment from multi-national companies, which are wanting to shift operations from China in view of ongoing Sino-US trade war, she said while moving the Taxation Laws (Amendment) Bill, 2019 for consideration and passage.

FM's decision

The Bill seeks to replace the Ordinance which was promulgated by the President in September.

The government through the ordinance reduced the corporate tax rate from 30 per cent to 22 per cent, and for new manufacturing companies to 15 per cent. The companies opting for lower tax rates, however, will not be entitled to claim any rebate or deductions.

"We think we will attract investment by reducing tax rate", she said while stressing that several neighbouring countries and emerging nations have reduced tax rates to attract investment.

She further said that with the reduction of the corporate tax rate, the effective rate will come down to 25.17 per cent from 34.94 per cent. The effective tax rate for new manufacturing companies, which will be entitled to a 15 per cent rate would be 17.16 per, she said. Besides other things, the bill has also provided a negative list of businesses that will not be entitled to a concessional tax rate of 15 per cent.

The companies engaged in the development of computer software mining, converting marble blocks into slabs, bottling of a gas cylinder, the printing of books and the cinematographic film will not be treated new manufacturing entities for the purpose of concessional tax. The government, she said, has also partially rolled back the surcharge announced in the budget to attract investment from the foreign portfolio investors (FPIs).

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