Companies with Rs 250 crore turnover to pay 25 per cent corporate tax

The Budget proposes “to extend the benefit of this reduced rate of 25 per cent to companies that have reported turnover up to Rs 250 crore in 2016-17”.
File Photo for Representational Purposes
File Photo for Representational Purposes

NEW DELHI: Following up last year’s five per cent corporate tax cut for firms with turnover up to Rs 50 crore, Finance Minister Arun Jaitley has extended the concession to a wider base of small companies this time around.

The Budget proposes “to extend the benefit of this reduced rate of 25 per cent to companies that have reported turnover up to Rs 250 crore in 2016-17”.

“This will benefit the entire class of micro, small and medium enterprises which accounts for almost 99 per cent of companies filing their tax returns,” Jaitley noted. The government expects the incentives to result in an estimated revenue fall of Rs 7,000 crore during 2018-19. The move is part of a series of measures focused on boosting the MSME (micro, small and medium enterprises) sector and, in turn, enhancing languishing job creation.

“The lower corporate income tax rate for 99 per cent of the companies will leave them with higher investible surplus, which in turn will create more jobs,” Jaitley said.

Along with the tax cut, the government has also proposed rolling out other measures — primarily to ease availability of credit to small firms. Allocations to the labour-intensive textile sector have been increased from Rs 6,000 crore to Rs 7,148 crore.

“This measure (tax cut), as also the enhanced budgetary allocation… for credit support, capital and interest subsidy will have a benign impact on the smaller enterprises. That apart, simplification of procedures for credit availability through online-system for SMEs is a very welcome step,” Nirmal Minda, President, Automotive Component Manufacturers Association of India, said.

However, some experts like R Narayan, CEO, Power2SME, say there were a few disappointments. “We had hoped for some more transformational reforms to boost overall morale,” he noted, pointing out that measures to address issues of delayed payments to MSMEs were absent.

Move to fast-track TReDS mechanism

The budget also announced measures to fast-track the Trade Electronic Receivable Discounting System (TReDS), an online mechanism for facilitating the financing of trade receivables of MSMEs through multiple financiers.

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