PwC India has recommended the government extend the concessional corporate tax rate of 15% for new manufacturing units for at least five more years. This move aims to boost domestic manufacturing and foster import substitution. PwC partners emphasized this key industry request during a recent press briefing, urging the Centre to consider it for the full Budget.
Background and Industry Expectations
The concessional regime, offering a 15% corporate tax rate, was initially introduced via an ordinance in September 2019. It applied to domestic manufacturing companies incorporated after October 1, 2019, and which commenced production before March 31, 2024. The scheme aimed to incentivize manufacturing by introducing a competitive tax regime. However, this benefit ended in FY24.
Industry leaders and tax experts had previously requested an extension of this regime during the interim Budget, but the Centre declined. PwC argues that extending the sunset date will make India more attractive for fresh capital investment, boost the domestic economy, and encourage exports.
Additional Recommendations
Besides the extension of the concessional tax rate, PwC has proposed a one-time settlement scheme to clear past litigations in customs. This scheme could be modeled after the Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 (SVLDRS) for pre-GST era indirect taxes and Vivad Se Vishwas (‘VSV’) for Income Tax. According to PwC Partner Pratik Jain, around 30,000 cases are pending in various courts, involving over Rs 40,000 crore. An amnesty scheme could substantially reduce this backlog, thereby increasing government revenue and providing relief to businesses.
Another significant suggestion from PwC is the introduction of group taxation. Currently, separate business verticals are incorporated based on their specialization by the parent company, requiring each entity to file its own Income Tax Return (ITR) and undergo independent scrutiny. This process demands considerable time and effort for compliance.
PWC believes that a tax consolidation scheme would centralize tax compliances, reduce administrative costs for government revenue departments, and lower compliance costs for corporate taxpayers. By consolidating the financials of companies under the same group for tax purposes, this approach could streamline operations and enhance efficiency.
