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Mini-Budget after Budget: Govt slashes corporate tax rate 10%

Mini-Budget after Budget: Govt slashes corporate tax rate 10%

Panaji: Grappling with a six-year low economic growth and a 45-year high unemployment rate, the government on Friday slashed corporate tax rates for companies by almost 10 per cent to 25.17 per cent to bring them at par with Asian rivals such as China and South Korea, as it looked to boost demand and investments.

The new tax structure is effective from April 1, 2019. It will cost the government Rs 1.45 lakh crore in revenue annually and may potentially derail the country's fiscal deficit roadmap.

In the fourth phase of post-budget economic stimulus measures, Sitharaman cut base corporate tax for existing companies to 22 per cent from current 30 per cent; and for new manufacturing firms, incorporated after October 1, 2019, and starting operations before March 31, 2023, to 15 per cent from current 25 per cent.

This will be effective on the condition that these companies will not avail any other incentive or concession such as tax holiday enjoyed by units in Special Economic Zones (SEZ) and accelerated depreciation.

The effective tax rate for existing units, after considering surcharges and cess such as Swachh Bharat cess and education cess - which are levied on top of the income and corporate tax rates, will be 25.17 per cent as compared to 34.94 per cent now. For new units, it will be 17.01 per cent now as opposed to 29.12 per cent.

Sitharaman also said no tax would be charged on share buyback by listed companies that announced such a move before July 5.

Also, super-rich tax by way of enhanced surcharge on income, announced in the July 5 Budget, will not apply to capital gains arising on equity sale or equity-oriented funds liable to securities transaction tax (STT) to stabilise the flow of funds into capital markets.

Also, the companies will not have to pay minimum alternate tax (MAT).

She said any company which does not opt for concessional tax regime and avails tax exemptions or incentives should continue to pay tax at pre-amended rates.

To provide relief to companies which continue to avail exemptions and incentives, rate of MAT has been reduced from existing 18.5 per cent to 15 per cent.

Prime Minister Narendra Modi termed as "historic" the cut in corporate tax rates and asserted that economic announcements made in the last few weeks show that his government is leaving no stone unturned to make India a better place to do business. Home Minister Amit Shah said the slashing of corporate tax rates would make the country's markets "much more exciting" for potential investors.

MPOST BUREAU

MPOST BUREAU

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