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Budget 2023: Concessional Tax Regime for New Manufacturing Cooperative Societies | Section 115BAE

Introduction:


The Indian government has proposed several amendments in the Taxation Laws (Amendment) Act, 2019 to provide a level playing field between new manufacturing companies and new manufacturing cooperative societies. The act, inter-alia, inserted section 115BAB in the act, which provided a concessional tax rate of 15% for new manufacturing domestic companies that commence manufacturing or production by 31st March 2023. In the light of these changes, it is proposed to extend the concessional tax regime to new manufacturing co-operative societies as well.


Incorporation Conditions


The cooperative society has been set-up and registered on or after the 1st day of April, 2023, and has commenced manufacturing or production of an article or thing on or before the 31st day of March, 2024


Provisions for Concessional Tax Regime:


It is proposed to insert a new section 115BAE in the act to extend the concessional tax regime of 15% to new manufacturing cooperative societies. The act further proposes that any machinery or plant used outside India by any other person shall not be regarded as machinery or plant previously used for any purpose on fulfilment of certain specified conditions. The act also proposes that if the total value of previously used machinery or plant does not exceed 20% of the total value of the machinery used by the assessee, then the concessional rate shall apply on fulfilment of the specified conditions.


Restrictions and Requirements:


The act also imposes several restrictions and requirements for the assessee to be eligible for the concessional tax rate. The assessee should not be engaged in any business other than the manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by it. The business of manufacture or production of any article or thing shall include the business of generating electricity, but not include certain specified businesses. Further, most of the conditions are same as provided for New manufacturing Companies u/s 115BAB of the Act.


Expansion of Domestic Transactions:


To ensure that the provisions are comprehensive and cover all relevant transactions, the act proposes to insert a new clause (vb) in section 92BA of the act to include the transaction between the cooperative society and the other person with close connections within the purview of ‘specified domestic transactions’.


Effective Date:


These amendments are proposed to take effect from 1st April 2024 and shall accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.


Conclusion:


The proposed amendments in the Taxation Laws (Amendment) Act, 2019 are a step in the right direction to provide a level playing field between new manufacturing companies and new manufacturing cooperative societies. The concession tax regime will provide a much-needed boost to the cooperative sector and encourage more companies to set up operations in India. The restrictions and requirements imposed by the act ensure that only eligible assessees receive the benefits of the concessional tax rate.

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