New Delhi: The Lok Sabha on Monday passed the Taxation Laws (Amendment) Bill, 2019, to replace the Ordinance that slashed corporate tax rates in September. The bill will amend the Income Tax Act 1961 and the Finance (No 2) Act 2019.
In the biggest reduction in 28 years, the government has slashed corporate tax rates for existing companies to 22 per cent from 30 per cent, and to 15 per cent from 25 per cent for new manufacturing firms incorporated after October 1, 2019 and starting operations before March 31, 2023.
In all, the tax breaks amounted to a whopping Rs 1.45 lakh crore.
Earlier, replying to a debate on the in the Lok Sabha, Finance Minister Nirmala Sitharaman allayed fears that the steep corporate tax cut would impact revenue collection. Asserting that there is no decrease in tax collections, Sitharaman said in fact, there is an increase of 5 per cent in the gross direct tax collection till November in this fiscal.
Historically, maximum collection of direct taxes happens in the last quarter of the fiscal, she added.
The government’s decision to reduce corporate tax rate, she said, was aimed at attracting investment and creating jobs. “The government’s decision was also necessary to attract investment from multi-national companies, which are wanting to shift operations from China in view of ongoing Sino-US trade war,” she said.
“We think we will attract investment by reducing tax rate”, she said while stressing that several neighbouring countries and emerging nations have reduced tax rates to attract investment. She said several domestic and global firms have expressed interest in investment post- annou-ncement of the corporate tax cut. She said the effective rate has come down to 25.17 per cent from 34.94 per cent.
On the liquidity issue in the system, the finance minister said banks have disbursed about Rs 2.5 lakh crore during their recent outreach programme.