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India’s Electric Vehicles Industry is likely to receive a lot of support with the slashing of the Corporate Tax Rate on new manufacturing companies. The vision of the Ministry is to promote manufacturing of Electric Vehicle parts within India and stop importing them from abroad. This is because the value of Indian Rupees had drastically fallen down in recent years and imports have become expensive.
Henceforth, with the change in rate slab in the corporate taxes, by the government it is planning to help manufacturing companies manufacture electronic parts such as Lithium-ion Batteries, charging equipment and electrical & electronic parts in India itself.
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As most of the Makers of Electric Vehicles and their parts/components are planning to invest and manufacture in India itself, they would be encouraged to accelerate their plans after the Announcements made by the Finance Minister Nirmala Sitharaman.[1] The aim behind taking these steps is to propel domestic production, specifically in producing Lithium-ion Batteries, charging equipment and electrical & electronic parts.
Additionally, with the falling value of rupee, imports have become very expensive, and because of that, the manufacturing companies are looking forward to localization of the components within India under the newly announced tax regime for new units.
As per the announcement by the Finance Minister, Nirmala Sitharaman the new manufacturing companies incorporated on or after 1st October 2019 will have to pay Income Tax at the rate of 15% which was 25% before.
Other amendments are as follows;
The Finance Minister quoted “Tax concessions will bring investments in Make in India, boost employment and economic activity, leading to more revenue.”
For full information on Reduction in Corporate Taxes read our blog: Historic Tax Reform: Reduction in Corporate Taxes.
Corporate tax or corporate income tax is levied by the federal and state governments on the profits made by the corporate or businesses. In other words, corporate tax is a tax imposed on the net income of a company.
The definition of corporate tax according to Wikipedia is “A corporate tax, also known as corporation tax or company tax is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities.” Many countries impose these taxes at the national level and similar taxes are imposed at state or local levels.
In India, both private and public companies are required to register under the Companies Act, 2013 and are liable to pay corporate tax. The current corporate tax rate has been reduced to 22% which was 30% earlier.
The following are the benefits that are projected/ envisioned by the government through reducing Corporate Taxes;
The Indian Government envisions increasing electronic vehicle parts production within India instead of importing them. This would help reducing the electronic vehicle final cost, and increase the trend of these vehicles in India. Also, this would help beat the environment pollution because of the use of crude oil use. Henceforth, the government has reduced the Corporate Tax for achieving these goals and to encourage the EV Sector.
Read Also: What are the Income Tax Laws for Startups in India.
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