Industry expects the budget to extend the cut-off date to set up a manufacturing unit to be eligible for concessional taxes under section 115BAB of Income Tax Act.

Section 115BAB was introduced in the Income Tax Act through Income Tax Ordinance 2019 to provide a concessional rate of tax for new manufacturing companies.

Under this section, a manufacturing company set up in certain specified sectors after October 1, 2019 will be allowed the option to pay tax at 15 per cent — actually 17.16 per cent including surcharge and cess — subject to conditions.

One condition is the company should commence manufacturing/production on or before March 31, 2023.

Industry body Ficci has urged the government to extend the date till March 31, 2025. “In the wake of ongoing Covid pandemic, the economic activity has been adversely affected with supply chain disruptions, labour mobility, spending slowdowns, jitters over credit markets etc.”

The newly established domestic companies are unable to work towards meeting the projected timelines and it looks difficult to meet the March 31, 2023 deadline. Heavy industries with long gestation period will particularly find it difficult, Ficci said.

“Prior announcement of extended date will facilitate global players to commit capital to India to set up new manufacturing facilities in a planned and organised manner,” Ficci said in its memorandum .

“There is a possibility of extension of lower tax regime for new manufacturing companies. As of now it is only applicable for plants that commence operations by March 31, 2023.

“We will also have to watch out for the kind of allocations that are being made for the PLI scheme,” said Govindarajan Chellappa, MD, head of research, Axis Capital .

He added that the capital expenditure outlay of the government would be another area keenly watched by analysts in the Union budget which would be a crucial driver for the manufacturing sector.