Mfg cos, SEZs can ben­e­fit by plan re­jig

The Times of India (New Delhi edition) - - Business - Sid­[email protected] times­

Panaji: The new tax rate of 15% for com­pa­nies that are in­cor­po­rated from next month and set up man­u­fac­tur­ing fa­cil­i­ties by March 2023 has al­ready got con­sul­tants think­ing about how to op­ti­mise a com­pany’s taxes.

For in­stance, a new com­pany that sets up a ca­pac­ity to man­u­fac­ture 100 units of a prod­uct in the stip­u­lated time frame and adds to it by ac­quir­ing a plant or an as­set will still be el­i­gi­ble for ben­e­fits un­der the new regime, but on a pro-rata ba­sis. In ad­di­tion, tax prac­ti­tion­ers said, the ben­e­fit on old plant and ma­chin­ery will be lim­ited to 20% of the value.

Be­sides, com­pa­nies can also in­cor­po­rate new sub­sidiaries that can set up a new man­u­fac­tur­ing plant and re­duce its tax outgo. “It will be treated as fresh in­vest­ment and el­i­gi­ble for the new rate,” said Sud­hir Ka­pa­dia, who heads the tax prac­tice at EY In­dia.

Units in spe­cial eco­nomic zones (SEZs) that will see their tax ex­emp­tions grand­fa­thered or with­drawn from next April are seen to be one of the ben­e­fi­cia­ries of the new regime. “New in­vest­ments in SEZs on or be­fore March 31, 2020, could be at­trac­tive, whether or not tax hol­i­day ben­e­fit is availed, with the re­duced cor­po­rate tax rate of 15% for man­u­fac­tur­ing com­pa­nies and 22% for other seg­ments. The ex­ist­ing en­ti­ties op­er­at­ing in SEZ have an option to take ben­e­fit of the re­duced

cor­po­rate tax rate of 22%, with­out avail­ing any tax ex­emp­tions,” said Vikram Doshi, a part­ner at PwC In­dia. He added that even if they do not opt for the con­ces­sional rate, the bur­den will re­duce as MAT has been low­ered from 18.5% to 15%.

PwC’s anal­y­sis showed that there are sev­eral sec­tors where the tax ben­e­fits are ex­pir­ing or get­ting lower from April, which could straight away shift to the 22% levy for ex­ist­ing com­pa­nies.

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