Lawyer Monthly Magazine - November 2019 Edition

whether the goods procured are sold in India or exported. Further, the current cap of considering exports for 5 years only shall be removed, (ii) The ‘sourcing of goods from India for global operations’ can be done directly by the entity undertaking SBRT or its group companies (resident or non-resident), or indirectly by them through a third party under a legally tenable agreement, (iii) the entire sourcing from India, and not just the year on year incremental value for global operations shall be considered towards local sourcing requirement, and (iv) retail trading through online trading can be undertaken prior to the opening of brick and mortar stores, subject to the condition that the SBRT entity opens brick and mortar stores within two (2) years from the start date of online retail. The Press Note no. 4 shall come into effect from the date of the relevant foreign exchange management (FEMA) notification. The relevant (FEMA) notification is yet to be issued. CORPORATE TAX RATES REDUCED On 20 September 2019, the Finance Minister Ms. Nirmala Sitharaman slashed the corporate tax by almost 10%. This is the biggest reduction in 28 years done with an objective to bring corporate tax rates at par with other Asian countries such as China and South Korea. HIGHLIGHTS • Corporate tax rate has been slashed to 22% (which was 30% earlier)fordomesticcompanies not availing any incentives/ exemptions. Effective tax rate for such companies now stands at 25.17% (which was 34.94% earlier) including cess and surcharge. Also, such companies shall not be required to pay minimum alternate tax (MAT). • New domestic companies incorporated on or after 1 October 2019, making fresh investment in manufacturing can pay income-tax at a rate of 15% (as against the earlier rate of 25%). This benefit is available to companies which do not avail any exemption/ incentive and commences their production on or before 31 March 2023. Their effective tax rate will be 17.01% inclusive of surcharge and cess (as against the earlier rate of 29.12%). These companies, too, will not be required to pay MAT. • A company which does not opt for the concessional tax regime and avails the tax exemption/incentive shall continue to pay tax at the pre-amended rate. However, these companies can opt for the concessional tax regime after the expiry of their tax holiday/exemption period. After the exercise of the option, they shall be liable to pay tax at the rate of 22% and the option once exercised cannot be subsequently withdrawn. Further, in order to provide relief to companies which continue to avail exemptions/ incentives, the rate of MAT has been reduced from existing 18.5% to 15%. • In order to stabilise the flow of funds into the capital market, it is provided that enhanced surcharge introduced by the Finance (No.2) Act, 2019 shall not apply on capital gains arising on sale of equity share in a company or a unit of an equity oriented fund or a unit of a business trust liable for securities transaction tax (STT), in the hands of an individual, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI) and Artificial Juridical Person (AJP). • The enhanced surcharge shall also not apply to capital gains arising on sale of any security including derivatives, in the hands of Foreign Portfolio Investors (FPIs). Regulatory Update of the Month: India By Clasis Law 20 WWW.LAWYER-MONTHLY.COM | NOV 2019 “ “ On 20 September 2019, the Finance Minister Ms. Nirmala Sitharaman slashed the corporate tax by almost 10%. This is the biggest reduction in 28 years done with an objective to bring corporate tax rates at par with other Asian countries such as China and South Korea.