Budget Wishlist.. Deloitte India pushes for 2-year extension on concessional tax for new manufacturers

The Centre must in the upcoming Budget extend by two years the window for concessional corporate tax rate for new manufacturing companies, Rohinton Sidhwa, Partner, Deloitte India, has suggested. 

In 2019, the regime of concessional corporate tax rate of 15 per cent was introduced for newly-established domestic manufacturing companies. This benefit was available to domestic manufacturing companies registered on or after October 1, 2019 and which commenced manufacturing or production on or before March 31, 2023. The Finance Act 2022 extended this sunset date to March 31, 2024.

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Sidhwa highlighted that the 15 per cent concessional tax rate has been crucial in attracting investments in India. It has yielded remarkable results, significantly boosting foreign direct investments in the Indian manufacturing sector, he said. He noted that there was substantial increase in FDI from ₹89,766 crore in FY 2020-21 to ₹1,58,332 crore in FY 2021-22, reflecting a 76 per cent jump. 

Recognising the substantial role this measure has played in advancing economic objectives and attracting FDI, the Budget may extend the sunset clause of this regime for additional two years, with effect from April 1, 2024, Sidhwa suggested. This extension will undoubtedly contribute to India’s economic growth, enhancing its attractiveness to investors, he said. 

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Corporate Restructuring 

The Budget should pave the way for framing comprehensive guidelines covering various administrative aspects related to corporate restructuring and minimise litigation, he said. 

Companies face challenges such as migration of tax credits, losses, benefits and registrations, during corporate restructuring due to the absence of a comprehensive mechanism/procedure/ guideline under income tax provisions in relation to corporate restructuring, Sidhwa added. 

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