MSMEs still need support for 2 years, concessional tax rate of 15% extended till March 2024: Revenue Secretary

New Delhi, Feb 5 (KNN) The government wants new domestic companies to set up their manufacturing units in India fast and hence the concessional tax rate of 15 per cent has been extended by a year till March 2024, Revenue Secretary Tarun Bajaj said on Friday.

Stating that direct and indirect tax collections are going up and have good buoyancy, Bajaj said it means that the corporate sector is also doing well, and India's tax to GDP ratio could be "highest ever" in the current year.

“So, while the revenues are going up, we are also happy that the corporate sector, especially the large ones, the MSMEs still need support for 1 or 2 years till it comes back," he said.

The budget 2022-23 presented on February 1 has proposed that the concessional 15 per cent corporate tax rate would be available for one more year till March 2024 for newly incorporated manufacturing units.

While reducing the corporate tax rate in September 2019, the government had said that any new domestic company incorporated on or after October 1, 2019, making fresh investment in manufacturing, will have an option to pay income-tax at the rate of 15 percent if they commenced their production on or before March 31, 2023.

However, these companies will not be allowed to avail of any income tax exemption/ incentive.

"Our tax: GDP ratio went down to below 10 per cent in the year, we brought down tax rates, but it has now started coming up. 

I will not be surprised if in the current year, my tax to GDP ratio is the highest ever for direct and indirect taxes taken together," Bajaj said at an Assocham event here.

India has been able to more than double the capital expenditure in the last three years, and that would push GDP growth, and once growth is pushed, a lot of things will fall in place.

The jobs will fall in place, business, taxes and income will improve. So, once that starts happening, we also expect the private sector to then come in and replace the public sector in terms of its investments and take the economy forward, he added. 

It is in that context only the provision of 15 percent tax for new manufacturing companies has been extended by a year.

"The message is very clear that we would like you to set up your factories and manufacturing units fast, the time limit given has been extended by one more year and yes, there will be a sunset clause and then we will move to 22 percent, which is what the corporate tax rate is. 

This is being given as special dispensation for manufacturing units to set up their factories sooner than later," Bajaj told the industry chamber.

He said the rise in tax to GDP ratio shows that the government is stabilizing its tax policy and the corporate sector is also adjusting to the less exemption regime.

After a gap of three years, direct tax collections which include corporate tax and personal income tax have exceeded the budget estimates for the 2021-22 fiscal ending March 2022, indicating economic recovery.

"I feel happy that if the revenue collection is going up, showing good buoyancy, that means the corporate sector is also doing well. And unless the corporate sector does well, I don't think we can move the wheels of the economy. He added. (KNN/Bureau)