In what could boost the sentiments of the industry as well as might have a ripple effect on re-energizing the Indian economy, the government is considering to re-introducing the concessional corporate tax scheme for new manufacturing units, but in a slightly different avatar.
According to sources, who wished to remain anonymous, “both the Finance Ministry and the PMO are actively considering this proposal, which has been shared by India Inc.”
However, sources added that this time, “the scheme could be reintroduced at a higher rate of 18%, plus cess and surcharges, instead of the earlier 15% plus cess and surcharges.”
Sources, who are privy to the ongoing discussions between the Finance Ministry and the Prime Minister’s Office, noted that “the proposal is currently at the drawing board stage for detailed analysis, and no final decision has been made as yet.”
First introduced in September 2019, the government under Section 115BAB of the Income Tax Act, had said that to boost private investment in manufacturing by offering globally competitive tax rates, India will allow domestic manufacturing companies incorporated after October 1, 2019 to pay a 15% tax rate, plus surcharge and cess, provided they commenced production by March 31, 2023.
This scheme was later on extended till March 31, 2024 due to pandemic-induced delays.
Sources said that, according to recommendations, the scheme “has the potential to promote the Make in India initiative, reduce reliance on imports, enhance employment generation, and give a renewed push to manufacturing.”
If reintroduced, experts say the scheme could position India as a global manufacturing hub, competing with countries like China, Japan, and Vietnam for foreign investments.
Ahead of the Interim Budget 2024, industry stakeholders had called for an extension of the sunset date to 31 March 2025 in their Budget expectations document. However, the Interim Budget did not accommodate this request.
