InvestorQ : What are the companies that can claim the benefit of concessional 15% tax as announced by the finance minister in September this year?
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What are the companies that can claim the benefit of concessional 15% tax as announced by the finance minister in September this year?

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2 years ago
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The Taxation Laws Amendment Bill gave some important clarifications about who is eligible for the concessional rate of 15% and which companies are not eligible. Here are some key highlights.

· This benefit is only for new companies involved in mainstream manufacturing and will not be applicable for firms that develop computer software, involved in mining, covert marble blocks into slabs, bottle gas into cylinders, printing etc. this clarification puts to rest whether all manufacturing will be eligible for the concessional 15% rate of tax. The Bill also clarified that the cess and surcharge will be on top of this rate.

· The Bill also clarified that this benefit of 15% will only apply to companies set up after Oct. 1, 2019, and which commence manufacturing or production of goods before March 31, 2023. The new rate of 15% will only apply in these cases.

· There may be bad news for existing companies who may look to restructure their business and transfer assets to a new firm during that period. The bill clarified that companies trying to create a new firm by transferring existing assets to avail a lower corporate tax will not be eligible. That takes away a key incentive for existing companies.

· When companies merge, they will not be able to set-off previous losses or unabsorbed depreciation of the pre-merged entity. Similarly, the bill also clarified that short-term capital gains tax on non-depreciable assets would be applicable at 22% only.

· The 15% tax companies will not be able to claim their MAT credits. This could have led to extensive litigation.

The bill does some clarity although the clause on existing companies not be allowed to claim lower tax for new ventures will be a negative for market sentiments.

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