The Ministry of Finance has yet to give a green light to the proposal of the Ministry of Trade and Industry to offer a concessional corporate tax rate of 15% for an extended period to all green units and to certain brownfield units in future “development hubs”. once the proposed Development of Business and Service Centers (DESH) legislation will replace the existing Special Economic Zones (SEZ) law, a source who follows the matter said.
“The Commerce Department wants the 15% concessional corporate tax rate, currently available to all new manufacturing units nationwide through March 2024, extended for 15 years to DESH units. a matter which falls within the competence of the Central Board of Direct Taxes and which has not yet been resolved by it,” the source said. Activity area.
The Center had reduced corporate tax rates from 30% to 22% for existing businesses and from 25% to 15% for new manufacturing businesses in 2019. While the 15% corporate tax rate was proposed to new manufacturing companies that begin operations by March 2023, it was extended for one year in this year’s budget.
“Extending the concessional corporate tax rate for a longer period for DESH units could play an important role in attracting investment to the DESH hub. But the Ministry of Finance should also bear in mind its considerations of revenue. Hopefully a decision will be made on that soon,” the source said.
The Ministry of Finance had proposed replacing the existing law on Special Economic Zones (SEZs) with a new DESH law in this year’s Union budget to build more inclusive economic hubs, rekindle investor interest for SEZs and to bring SEZ rules into line with WTO rules.
The Ministry of Trade and Industry, which is working on the DESH bill, seeks to propose a policy that will promote manufacturing and services for international and domestic markets.
Replacement of the SEZ law
The SEZ law, which was notified in 2006, became less attractive to investors after the introduction of the alternative minimum tax and the introduction of the sunset clause for direct tax exemptions. The net foreign exchange gain clause has brought SEZ incentives into conflict with WTO rules.
Other incentives offered under DESH include maintaining the zero rate of IGST (Integrated Goods and Services Tax) on domestic purchases by a SEZ unit, maintaining indirect tax benefits for developers, and the authorization of depreciation on the sale of used capital goods cleared in national tariff zones. .
The Desh Bill was due to be introduced in the monsoon session of Parliament but has been delayed as the Ministry of Trade and Industry wishes to hold further discussions with other ministries and departments.
August 16, 2022