Budget 2023: 15% Concessional Tax Rate to New Manufacturing Co-operative Society

A 15% tax rate discount is proposed in the budget for 2023 for new manufacturing cooperative societies. Such a deduction, according to Finance Minister Nirmala Sitharaman, is intended to encourage the expansion of manufacturing in the cooperative sector.

According to the proposal new co-operative society formed on or after 01.04.2023, which commences manufacturing or production by 31.03.2024 and do not avail of any specified incentive or deduction and is proposed to be allowed an option to pay tax at a concessional rate of 15 per cent similar to what is available to new manufacturing companies.

A new section 115 BAE of the Income Tax Act was proposed after section 115BAD, which would give a favourable tax structure for newly formed manufacturing cooperative organisations.

There has been support for establishing parity between new manufacturing cooperative societies and new manufacturing businesses.

According to the Finance Bill, 2023, insertion of 153 BAE stated that  Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, other than those mentioned under section 115BAD, the income-tax payable in respect of the total income of an assessee, being a co-operative society resident in India, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2024, shall, at the option of such assessee, be computed at the rate of fifteen per cent, if the conditions contained in subsection (2) are satisfied:

The following conditions shall apply, namely:—

 (a) 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 and,—

           (i) the business is not formed by splitting up, or the reconstruction, of a business already in existence;

         (ii) does not use any machinery or plant previously used for any purpose.

(b) the assessee is not engaged in any business other than the business of 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. 

(c) the total income of the assessee has been computed,—

               (i) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 33AB or section 33ABA or subclause (ii) or sub-clause (iia) or sub-clause (iii) of subsection (1) or sub-section (2AA) of section 35 or section 35AD or section 35CCC or under any of the provisions of Chapter VI-A other than the provisions of section 80JJAA;

            (ii) without set off of any loss carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); and

         (iii) by claiming the depreciation, if any, under section 32, other than clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed.

These changes are planned to go into effect on April 1st, 2024, and will thus be applicable to the assessment years 2024–2025 and any later assessment years.

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