Notwithstanding its acute budget constraints, the government on September 20 unveiled a massive fiscal stimulus of Rs 1.45 lakh crore or 0.7% of the gross domestic product (GDP), in the form of surprise, more-than-asked-for tax cuts for the corporate India.

Finance minister Nirmala Sitharaman on Monday introduced the Taxation Laws (Amendment) Bill, 2019, in the Lok Sabha to replace an Ordinance slashing corporate tax rates to stimulate economic growth.

The minister also introduced the International Financial Services Centre Authority Bill, 2019, to provide for a unified financial regulator for IFSCs.

Notwithstanding its acute budget constraints, the government on September 20 unveiled a massive fiscal stimulus of Rs 1.45 lakh crore or 0.7% of the gross domestic product (GDP), in the form of surprise, more-than-asked-for tax cuts for the corporate India.

Through the Ordinance, the Centre reduced the corporate tax rate from 30% to 22% (excluding cess and surcharge) for domestic firms and from 25% to 15% for new manufacturing firms. The Taxation Laws Bill would amend the Income Tax Act, 1961, and the Finance Act, 2019, to give effect to these changes, among others.

Domestic companies now have the option of paying tax on their income effective FY20 at 22% (25.17% including surcharge and cess) or pay the 30% rate (34.94%) and avail themselves of assorted incentives to reduce the actual tax incidence. Also, effective this fiscal, any new domestic company formed on or after October 1, 2019, and making fresh investment in manufacturing now have the option to pay corporate income tax at a rate of 15% (17.1% inclusive of surcharge and cess), provided they don’t avail themselves of exemptions and incentives. Previously,the peak rate for domestic manufacturing companies, set up on or after March 2016 and not claiming any incentives or exemptions, was 29.12%.

International Financial Services Centre Authority Bill provides for the establishment of an authority to develop and regulate the financial services market in the IFSCs such as GIFT City in Gujarat. All powers relating to regulation of financial products, services, and institutions in IFSCs, which were previously exercised by the respective regulators will be exercised by the Authority. Currently, the banking, capital markets and insurance sectors in IFSCs are regulated by multiple regulators i.e. RBI, Sebi, Irdai and PFRDA. The dynamic nature of businesses in the IFSCs necessitates a high degree of inter-regulatory coordination.