The Rajya Sabha on Thursday approved the Taxation Laws (Amendment) Bill, 2019, replacing an ordinance that was used to cut corporate tax rates to boost growth rate in a slowing economy. The Upper House cleared the legislation with voice vote without any changes.
The Lok Sabha has already passed the bill, which will replace the ordinance promulgated on September 20, 2019, to cut the rate of base corporate tax to 22 per cent from 30 per cent.
According to rules, the Rajya Sabha cannot amend money bills but can recommend amendments. A money bill, that solely concerns taxation or government spending, must be returned to the Lok Sabha within 14 days, or the bill is deemed to have passed both houses in the form it was originally passed by the Lok Sabha.
Earlier on September 20, Finance Minister Nirmala Sitharaman had announced the lowering of base corporate tax rate for companies that do not seek exemptions and reduced the rate for some new manufacturing companies to 15 per cent from 25 per cent. Including surcharges and cesses (levies to raise funds for specific purposes), the effective corporate tax rate will fall by nearly 10 per cent to 25.2 per cent.
The corporate tax cut measure was announced by the government to support the slowing GDP growth. The quarterly GDP growth has been falling for the sixth consecutive quarter - from a high of 8.1 per cent in Q4 of FY18 to 4.5 per cent in the last quarter (Q2 of FY20).
Besides reduction in corporate tax rates for existing and new domestic companies, the ordinance also implemented the withdrawal of higher surcharge for non-corporates on certain capital market transactions announced earlier on August 24, 2019. It would also provide relief from buyback tax for listed companies, with respect to buybacks which were publicly announced prior to the Budget announcement on July 5, 2019.
Edited by Chitranjan Kumar with PTI inputs