PHDCCI bats for concessional 15% tax rate for new manufacturing units

PHDCCI urges revival of concessional tax for new manufacturing units, reinstatement of R&D incentives, and GST reforms to ease compliance and boost India's competitiveness

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To boost India’s global manufacturing competitiveness and simplify tax administration, the PHD Chamber of Commerce and Industry (PHDCCI) has urged the finance ministry to reintroduce the 15 per cent concessional corporate tax rate for new manufacturing units and rationalise key provisions under the goods and services tax (GST) to improve ease of doing business.

 

In a pre-Budget meeting with Revenue Secretary Arvind Shrivastava on Wednesday, the chamber said the concessional tax regime under Section 115BAB of the Income Tax Act, which expired in March 2024, should be revived to attract fresh investments in line with India’s “China-plus-one” strategy.

 

The scheme, originally introduced in 2019, had limited traction due to the pandemic and global demand slump.

 

“A concessional rate of tax of 15 per cent would provide a major incentive for foreign companies to set up subsidiaries in India and invest in manufacturing units. This could help in growth of the economy, job creation and result in India being one of the major manufacturers of goods in the world,” the chamber said in its submission.

 

To encourage innovation-driven growth, PHDCCI recommended reinstating a weighted deduction of 150 per cent for research and development (R&D) expenditure without any sunset clause under Section 35, which was discontinued in 2020. It argued that such a move would help India emerge as a hub for high-value manufacturing and technology-led exports.

 

The chamber also sought rationalisation of individual and partnership tax rates.

 

It pointed out that while corporate tax cuts have enhanced collections and compliance, individual taxpayers continue to face an effective rate of up to 39 per cent in the top bracket. Partnership firms remain taxed at 30 per cent plus surcharge.

 

It proposed a three-tier personal tax regime — 20 per cent for income up to ₹30 lakh, 25 per cent for ₹30–50 lakh, and 30 per cent beyond ₹50 lakh — to ease the burden on the middle class and boost consumption.

 

On the indirect tax front, PHDCCI called for a series of amendments to the GST law aimed at reducing litigation and easing compliance for bona fide taxpayers. It recommended that Section 11A of the CGST Act be amended to allow refunds of taxes paid before retrospective exemptions, similar to provisions under Central Excise and Customs laws. 

 

"For instance, Notification No. 11/2025-CT (dated September 17, 2025) regularized certain such supplies. 

 

However, unlike corresponding provisions in Section 11C of the Central Excise Act and Section 28A of the Customs Act, Section 11A does not provide a mechanism for refunding taxes already paid (whether under protest or as pre-deposit) prior to the exemption. This omission creates an uneven playing field for compliant taxpayers," it said. 

 

The chamber also sought removal of the input tax credit (ITC) reversal condition under Section 15(3)(b)(ii) of the CGST Act for post-supply discounts, terming it an "impractical” burden on suppliers who have no control over the recipient’s credit utilisation. Further, it urged the government to restrict denial of input tax credit (ITC) under Section 16(2)(c) only after recovery mechanisms against defaulting suppliers have been exhausted.

 

Among other key GST recommendations were allowing ITC on motor vehicles, rent-a-cab, and warehouse construction used in the course of business by amending Section 17(5); withdrawing Notifications 8/2017 and 10/2017 imposing IGST on ocean freight under reverse charge in line with the Supreme Court’s Mohit Minerals judgment; and introducing a refund mechanism and abatement of pending litigation in cases where retrospective exemption notifications have been issued.

 

PHDCCI also raised sector-specific issues related to the steel, paper, gold, healthcare, and FMCG industries, calling for rationalisation of customs duties, correction of inverted duty structures, and facilitation of domestic value addition.