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Lower corporate tax of 25% for new manufacturing units

The government on Monday lowered the corporate tax for new manufacturing units at 25 per cent with a view to promote industrial activity and generate jobs. With regard to small units having a turnover of Rs 5 crore, the corporate tax rate has been reduced from 30  per cent to 29 per cent, Finance Minister Arun Jaitley said in the Budget 2016-17 tabled in the Lok Sabha. This is a part of exercise to bring down corporate tax rate in a phased manner from the existing 30 per cent to 25 per cent over a period of four years beginning next fiscal.

“In the first phase, I propose following two changes in the corporate tax rate,” he said. “The new manufacturing companies which are incorporated on or after March 1, 2016 as proposed to be given an option of being taxed at 25 per cent plus surcharge plus cess provided they don’t claim any profit link, investment link deduction and don’t claim any investment allowance at accelerated depreciation,” he said.

This will help incentivise setting up of new manufacturing units and generate employment. 
“I also propose to lower the corporate income tax rate for next financial year for relatively small enterprise companies with a turnover not exceeding 5 crore to 29 per cent plus surcharge plus cess,” he said. 

Jaitley also announced final plan of phasing out about ten exemptions given to corporate sector. Enunciating the details, he said the accelerated depreciation provided under IT Act will be limited to maximum 40 per cent from April 1, 2017 and the benefit of deductions for research would be limited to 150 per cent from April 1, 2017 and 100 per cent from April 1, 2020. 

IT hardware sector expects Rs 10K crore investment, lower prices
Hailing budget announcement, IT hardware companies expect prices of devices like modems, routers, set-top-boxes to go down by 8 per cent within a year and about Rs 10,000 crore investment in local production. 

“The change in duty structure will encourage manufacturing of consumer premise equipments like modems, routers, digital video recorder, STB for internet, IP camera. We expect investment of about Rs 10,000 crore for their local production. I expect their prices will go down by 8 per cent in first year and by 10 per cent in one and half year,” MAIT Senior Vice President Nitin Kunkolienker said. 

The Manufacturers’ Association for Information Technology (MAIT) however said though its a big boost for manufacturing of IT products, government has not given any impetus for local production of personal computers in the country and networking switches which are in heavy demand have also 
been left out. 
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