PwC India has recommended the government extend the concessional corporate tax rate of 15% (ended in FY24) for new manufacturing units for a period of at least five years, to boost domestic manufacturing, and foster import substitution. This is a key ask of industry which the Centre should consider for the full Budget, PwC partners told reporters on Wednesday.
FE had reported earlier that the government may announce a new scheme of concessional corporate tax rate for new manufacturing units in the Budget as it wants the private capex cycle to be uninterrupted. The new scheme is expected to be similar to an earlier one that offered a concessional rate of 15% compared with 22% for others, but that ended on March 31, 2024.
The concessional regime, with a corporate tax rate of 15%, was introduced via an ordinance in September 2019, with effect from FY20, for domestic manufacturing companies, incorporated post October 1, 2019, and which commenced production before the extended sunset timeline of March 31, 2024. This was mainly done to incentivise manufacturing by introducing a competitive tax regime.
Industry leaders and tax experts had asked the Centre to extend the concessional regime by at least one more year during the interim Budget, but the Centre had refused to do so.
“A further extension of the sunset date will enable India to remain attractive for making fresh capital investment, provide a boost to the domestic economy and also encourage exports,” PwC said in a note.
The other major suggestion by the global accounting firm for the government is to introduce a one-time settlement scheme to clear past litigations in customs. The scheme can be similar to Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 (SVLDRS) for pre-GST era indirect taxes and Vivad Se Vishwas (‘VSV’) for Income tax.
PwC Partner Pratik Jain said that so far an estimated 30,000 cases are pending in various courts, involving an amount of more than Rs 40,000 crore, which may reduce substantially with the operationalisation of an amnesty scheme, thereby increasing revenue for the government and providing much-needed relief to businesses.
Further, PwC recommended the concept of group taxation to be introduced, whereby the financials of companies under the same group should be consolidated for paying taxes in India.
Presently in India, separate business verticals are incorporated, based on their specialisation by the parent company. Each company is required to file Income Tax Return (ITR) separately. Each entity is independently scrutinised, which requires a lot of time and effort for ensuring separate compliances.
Thus, a tax consolidation scheme would help centralise tax compliances, reduce administrative costs for government revenue departments and reduce compliance costs for corporate taxpayers, said PwC.