Lok Sabha passes Taxation Law Amendment Bill to give effect to reduction in corporate tax. The bill, which was introduced by Finance Minister Nirmala Sitharaman in the Lok Sabha on November 25, will replace the Taxation Laws (Amendment) Ordinance, 2019, promulgated on September 20, 2019, to cut the base corporate tax rate to 22 per cent from 30 per cent.
Sitharaman had on September 20 announced the lowering of the base corporate tax rate to 22 per cent from 30 per cent for companies that do not seek exemptions, and reduced the rate for some new manufacturing companies to 15 per cent from 25 per cent.
Including surcharges and cesses (levies to raise funds for specific purposes), the effective corporate tax rate will drop by nearly 10 percentage points to 25.2 per cent.
The corporate tax cut follows other measures by the government to prop up slowing GDP growth adopted since the May general elections. These include efforts to reduce red tape and boost foreign direct investment (FDI), and plans to consolidate the state-owned banks.
Besides reduction in corporate tax rates for existing and new domestic companies, the Ordinance also implemented the withdrawal of higher surcharge for non-corporates on certain capital market transactions announced earlier on August 24, 2019, and also provides relief from buyback tax for listed companies in respect of buybacks which were publicly announced prior to the Budget announcement on July 5, 2019.