In a fillip to manufacturing, corporate tax rate slashed for domestic firms

Ahead of the GST council meet in Goa, Finance Minister Nirmala Sitharaman announced the slashing of corporate tax on domestic manufacturing companies.

Finance Minister Nirmala Sitharaman on Friday announced the slashing of corporate tax on domestic manufacturing companies. The announcement came ahead of the GST council meets scheduled in Goa today.

“Ordinance to slash corporate tax rates for domestic companies has been cleared by Cabinet”, Sitharaman said.

In the past few weeks, the government has announced a series of steps to provide a fillip to growth that had fallen to six-year low of 5% in June quarter.

Last week, the government had announced a series of measures to revive the housing sector and boost exports. On Thursday, the finance minister urged banks to increase lending to small businesses and retail borrowers to spur spending ahead of the final quarter festive season.

Here are the highlights:

* “To promote growth, a new provision has been inserted in the income tax act with effect from fiscal year 2019-20, which allows any domestic company to pay income tax at the rate of 22% subject to condition they will not avail any incentive or exemptions.”

* “Tax rate of 25.17 % on domestic firms.”

* “Relief to listed companies, which have made public announcements of buyback before July 5 2019, it is provided that tax on buyback of shares shall not be charged, the minister said.”

* “To provide relief to companies which continue to avail incentive or exemptions, even for them we are giving a Minimum Alternate Tax(MAT) relief, the MAT rate has been reduced to 15% from the existing 18.5%.”

* “Total revenue foregone for reduction in corporate tax rate and other relief measures is 145, 000 crore.”

* “In order to stablise the flow of funds into the capital market, it is provided that enhanced surcharge introduced in Budget of July 2019 shall not apply on capital gains arising on sale of equity share in a company or a unit of a equity oriented fund.”

* “The enhanced surcharge shall not apply on capital gains arising on sale of any security including derivatives in the hands of foreign portfolio investors.”