Industry Associations Await Clarity On Extension For Concessional Tax Rate

New Delhi, Jan 16 (KNN) The corporate sector in India is eagerly anticipating clarification regarding an extension to the deadline for accessing the reduced tax rate of 15 per cent on corporate tax on new manufacturing companies.

Various industry associations have formally requested the Finance Ministry for an extended three-year period for the concessional tax regime set to conclude on March 31 this year, reported TH.

People familiar with the matter have indicated that these appeals include seeking clarification on multiple uncertainties surrounding the scheme.

It remains uncertain whether the much-awaited clarity will be included in the upcoming interim Budget scheduled for presentation next month.

Experts argue that a one-year extension is insufficient, considering the impact of two years of the COVID-19 pandemic and the capital-intensive process of establishing a manufacturing plant.

Even with the reduced tax rates of 15 per cent for newly established manufacturing companies and 22 per cent for other corporates, the corporate income tax collections in January exhibited a notable year-on-year net growth of 12.37 per cent.

Currently, companies are required to satisfy specific criteria to be eligible for the reduced tax rate.

Experts note that as part of the tax return filing process, companies are mandated to declare the date of production commencement. However, in many instances, this may not have occurred by the time the initial income tax return is submitted.

The law prescribes a 22 per cent tax rate on incomes generated in the same company which is not incidental to or ancillary to the manufacturing business.

In 2019, a tax rate of 15 per cent (17.16 per cent after surcharge and cess) was introduced under Section 115BAB for new manufacturing companies. The initial deadline to benefit from these lower rates was March 31, 2023, and it was subsequently extended by a year.

The industry is now urging for an additional three-year extension to the sunset period. Despite this concessional tax structure, corporate income tax collections in January recorded a noteworthy year-on-year net growth of 12.37 per cent.

(KNN Bureau)