Budget 2024: Concessional corporate taxes to get another extension, say reports

The Indian government is considering a significant boost to the manufacturing sector by extending the favorable corporate tax rates for new companies, say several media reports.

These reports reveal that discussions are underway to prolong the existing concession for one to two years. This means the current sunset clause, set to expire on March 31, 2024, could see an extension. However, a final decision has not been reached yet.

At present, newly established domestic manufacturing firms enjoy a concessional corporate tax rate of 15 per cent. To qualify for this benefit, manufacturing units must begin operations by the end of March 2024.

This clause, first announced in the 2019 Budget, aims to attract more investments and stimulate growth in the manufacturing sector.

By offering favorable tax rates to new manufacturing companies, the government aims to make india a more appealing destination for businesses looking to set up manufacturing operations.

This aligns with the broader "Make in India" initiative, which encourages domestic production and reduces reliance on imported goods.

Experts believe that the concessions need to be extended for a period of two more years to see the full extent of the initiative's potential in bringing in new investments.

Abhishek Mundada, Partner, Dhruva Advisors, tells WION that the initiative must be extended for at least five to six years, if India wants to attract global manufacturers.

"Manufacturing sector is the thrust of this government, in terms of making India a global leader," Mundada says, adding that the government introduced this provision to take India's small manufacturing sector to "the next level".

Extending the concessional corporate tax rates would provide a financial incentive for companies to establish and expand their manufacturing units in india. This, in turn, could lead to job creation, technology transfer, and an overall boost to the economy.

The concessions can boost India's ambition to become the world's third-largest economy by the next decade. Mundada argues that countries have and will become a superpower, only with a strong manufacturing base.

With multinational firms increasingly 'de-risking' their supply chains away from China, India has the opportunity to divert manufacturers away from the world's 'factory'.

"After COVID-19 pandemic, the global market dynamics have changed. Boardroom are discussing a 'China +1' strategy and India is at the forefront of it. So, this (concessional tax) regime is important," he adds.