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National News

Dec 02, 2019

Country’s economy is in good shape: FM Sitharaman

Tweeted by @loksabhatv
The Lok Sabha today passed the Taxation Laws (Amendment) Bill, 2019. It will replace an ordinance promulgated in this regard.

The bill provides domestic companies with an option to pay tax at the rate of 22 per cent, provided that they do not claim certain deductions under the Income Tax Act.

Currently, domestic companies with an annual turnover of up to four hundred crore rupees, pay income tax at the rate of 25 per cent and for other domestic companies, the tax rate is 30 per cent.

Replying to a debate on the bill, Finance Minister Nirmala Sitharaman said, the government's decision to cut the corporate tax rate for domestic companies, including new manufacturers, was taken in view of US-China trade war.

She said that several South-East Asian nations have lowered their corporate tax rates and some others were contemplating rate cuts. In view of that, the government took the initiative of lowering corporate tax rates.

She said the move will help attract fresh investments, stimulate growth and generate employment.  

The Finance Minister said the country’s economy is in a good shape. She said Direct Tax Collection has registered a 5 per cent increase in November and GST Collection also crossed one lakh crore rupees.

Ms Sitharaman said despite spending on all welfare schemes, the country’s fiscal discipline is under control and is well maintained below four per cent.

Ms Sitharaman said, the new tax rebates will be provided only to the companies established after 1st October this year.

Companies set up before the date are enjoying the privileges and benefits, therefore, extending tax benefits to them would defeat the purpose of the new Bill. She said the NDA government hears the criticism and responds to it with positivity.

Refuting allegations by the Opposition, the Finance Minister said the new tax rebates are applicable to all companies that are registered under the Companies Act and not just to big corporates. She also refuted the allegation that financial benefits are reaching only to big corporate houses.

The Minister listed the number of beneficiaries of Pradhan Mantri Ujjwala Yojana, Jandhan Yojana, Ayushman Bharat, PM-Kisan Samman Nidhi Yojana and other schemes. She said, MNREGA funds are directly reaching the accounts of the beneficiaries.

The Finance Minister said the customer outreach programme of banks seeing 60 per cent of total fresh loans of 2.52 lakh crore rupees, proves that liquidity is not an issue for the banks.

Adhir Ranjan Chowdhury of Congress asked the government to explain what results have been achieved in the last two months after the ordinance on Taxation Laws was promulgated. He suggested the government lower GST rates to generate demand in manufacturing.

Members from other political parties, including DMK, AIADMK, CPI and TMC, also participated in the discussion on the bill.

The Bill also seeks to provide new domestic manufacturing companies with an option to pay income tax at the rate of 15 per cent on the condition that they do not claim certain deductions.

These companies must be set up and registered after September 30th, 2019, and start manufacturing before April 1st, 2023. The bill says a company can choose to opt for the new tax rates in the financial year 2019-20 or in any other financial year in the future.

Once a company exercises this option, the chosen provision will apply for all subsequent years. The Bill also says that provisions regarding payment of Minimum Alternate Tax (MAT) will not apply to companies opting for the rates. MAT is the minimum amount of tax required to be paid by a company in case its normal tax liability after claiming deductions falls below a certain limit.

The Bill adds that the provisions regarding MAT credit will also not apply to companies opting for the new rates. Under the Bill, MAT rate has also been reduced from 18.5 to 15 per cent applicable for companies not opting for the new tax rates with effect from the financial year 2019-20.

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