By Kuldeep Singh
Industry body PHDCCI on Wednesday recommended a concessional tax rate of 15% for the new manufacturing companies in the 2026-27 Budget. It stated that apart from promoting domestic investments in the sector, such a relief will also be major incentive for foreign companies to set up new subsidiaries, and invest in manufacturing in the country.
Section 115BAB of the Income Tax Act, introduced via an ordinance in 2019, a concessional rate corporate tax rate of 15% plus surcharge was introduced for new manufacturing units complying with certain conditions. The facility was available for companies that started manufacturing on or before March 2024, but was not extended thereafter. Though the response to the scheme was rather lukewarm, industry bodies persisted with their demand that the scheme be extended, given the perceived improvement in investment climate. This was however not done in Budget FY25 and FY26.
After a pre-budget meeting with Revenue Secretary Arvind Shrivastava here, Mukul Bagla, Chair–Direct Committee, PHDCCI, said: “We have recommended that for India to become a new manufacturing hub for the entire world, the Section 115BAB should be reintroduced so that there’s incentive of setting up new manufacturing units in India which will help in not only growth of Indian companies but help in growth of the economy and generate employment.”
The industry body also requested for reduction in rates of taxation for individuals, partnership firms and limited liability partnerships. It suggested that the maximum tax rate for income up to Rs 30 lakh should be 20% and from Rs 30 lakh to Rs 50 lakh, 25% and beyond Rs 50 lakh, it could be 30%. This will not only increase compliance and tax buoyancy but also lead to major relief to the middle class, it said.
The last Budget announced major personal income tax relief under the exemption-less new tax regime, with exemption for annual income up to Rs 12.75 lakh (including standard deduction of Rs 75,000). The PHDCCI noted in spite of tax foregone of close to Rs 1 lakh crore due to this, tax collections have been growing satisfactorily.
The industry body also sought an amendment in section 11A of the Central Goods and Services Tax Act to incorporate a refund mechanism for taxes paid prior to the issuance of retrospective exemption notifications. The provision empowers the government to grant retrospective exemptions for supplies previously subject to non-levy practices, thereby aiming to reduce litigation.