Mfg cos, SEZs can benefit by plan rejig
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Units in special economic zones (SEZs) that will see their tax exemptions grandfathered or withdrawn from next April are seen to be one of the beneficiaries of the new regime.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.