NEW DELHI : The government's decision to cut corporate tax rate for domestic companies, including new manufacturers, was taken in the context of companies exiting China amid a trade war, finance minister Nirmala Sitharaman told Parliament on Monday.
While moving the Taxation Laws (Amendment) Bill 2019 in Lok Sabha for passage, Sitharaman said that several South East Asian nations have lowered their corporate tax rates and some others were contemplating rate cuts. The minister said Singapore had a tax rate of 17%.
“Keeping in mind the trade war between the US and the People’s Republic of China and indications that many multinational companies wanted to get out of China, we had all the reasons, although the budget FY20 had been passed shortly before, we thought of reducing the corporate tax rate. Therefore, the Ordinance route was taken up because the house was not in session," the minister said in her opening remarks while pressing the Bill for the House’s consideration.
The Ordinance promulgated in September offered a lower 22% corporate tax rate for companies that do not avail of any tax incentives and a 15% rate for new manufacturing companies that start production before March 2023, in a bid to reverse the economic slowdown. It also lowered the rate of minimum alternate tax (MAT) that businesses which continue to avail of tax breaks have to pay to 15% from 18.5%.
The Bill also contains certain new proposals, which were not part of the Ordinance. It clarifies that new mining companies, software producers, gas bottling plants and book printers will not be eligible for the 15% corporate tax rate announced in September.