Finance Minister Nirmala Sitharman on Thursday said the lower 15 per cent tax rate for new manufacturing companies will not apply to computer software development, mining and printing of books.
She was replying to a debate in the Rajya Sabha on the Taxation Laws (Amendment) Bill, 2019 that replaces the Taxation Laws (Amendment) Ordinance, 2019, promulgated on September 20, 2019, to cut the base corporate tax rate.
The amendment carries a negative list of industries that will not qualify for lower tax rate meant for manufacturing companies set up on or after October 1, 2019 but that begin production before 2023, she said.
The negative list includes computer software development, mining and printing of books as they are not manufacturing per se, the minister added.
Sitharaman had on September 20 announced lowering of the base corporate tax rate to 22 per cent from 30 per cent for companies that do not seek exemptions, and reduced the rate for some new manufacturing companies to 15 per cent from 25 per cent. Including surcharges and cesses (levies to raise funds for specific purposes), the effective corporate tax rate will drop by nearly 10 percentage points to 25.2 per cent.
The corporate tax cut followed other measures by the government to prop up slowing GDP growth adopted since the May general elections. These include efforts to reduce red tape and boost foreign direct investment (FDI), and plans to consolidate the state-owned banks.
She said the objective of providing a lower 15 per cent corporate tax rate for new manufacturing units was to draw new investment.
New manufacturing companies have been given the option to move to the higher 22 per cent tax bracket if they fail to satisfy conditions meant for availing lower rates, she said.
Sitharaman also promised to continue rollout of reforms to boost the economy. GDP growth rate in July-September slowed to a six-year low of 4.5 per cent.
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