Money & Banking

Corporate tax cut: Co-operative sector peeved with lack of parity with India Inc

K Ram Kumar Mumbai | Updated on October 10, 2019 Published on October 10, 2019

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Chief of co-op societies’ body writes to Finance Minister urging level playing field

Entities in the co-operative sector, including those in the banking, dairy, sugar, fertiliser and food processing space, are disappointed that the benefit of the recent cut in corporate income tax is not available to them.

While their larger counterparts, including domestic and multinational companies, will reap the benefit of the cut in the tax on income (corporate tax) from 30 per cent plus surcharge and cess to 22 per cent plus surcharge and cess, co-operatives will continue to pay tax at the old, higher rate of 30 per cent plus surcharge and cess.

The selective relaxation in the tax on income has put the co-operative sector at a disadvantage vis-a-vis India Inc.

NAFCUB plea

To correct this anomaly, the National Federation of Urban Co-operative Bank and Credit Societies (NAFCUB) has written to Finance Minister Nirmala Sitharaman, requesting that there should be parity in the tax on income between co-operatives and companies.

Jyotindra Mehta, President, NAFCUB, said the co-operative sector also deserves the same relaxation that has been given to the corporates vis-a-vis tax on their income so that it too can grow at a faster rate and add to national growth.

Further, Mehta underscored that the schedule of rates of taxation of co-operatives should be revisited and revised to reflect present day realities.

In order to promote growth and investment, the government on September 20 announced incorporation of a new provision in the Income-tax Act with effect from FY 2019-20, allowing any domestic company an option to pay income-tax at the rate of 22 per cent subject to condition that they will not avail themselves of any exemption/incentive. The effective tax rate for these companies works to 25.17 per cent inclusive of surcharge and cess.

S Ravi, Managing Partner, Ravi Rajan & Co, said: “The recent measures (on reduction in the corporate tax rate) create an anomaly for the co-operative sector. Hence, a correction is required to bring in uniformity. This will enable the co-operative sector to grow and also make further investments.” Referring to the asymmetric situation that has been created due to the applicability of the tax cut on income, NAFCUB said a large private sector bank like HDFC Bank, which earned a net profit of ₹21,078 crore in FY2019, will pay tax at the lower rate of 22 per cent (plus surcharge and cess) for FY2020 whereas a small urban co-operative bank with, ₹1-2 crore net profit will pay tax at the higher rate of 30 per cent.

Other co-operatives such as the Indian Farmers Fertiliser Co-operative Ltd (IFFCO) and the Central Arecanut and Cocoa Marketing and Processing Co-operative Ltd (CAMPCO) will also be facing a similar situation.

Published on October 10, 2019
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