During his statement in Rajya Sabha, Amit Shah, Union Home and Cooperation Minister, stated major financial gain for co-operatives, especially manufacturing and dairy. New manufacturers and traders forming new co-operatives who participate in manufacturing will now be eligible for the lower corporate tax rate of 15% given to new manufacturing firms. It plans to achieve this by fostering the development of cooperative enterprises in the manufacturing industry.
Shah also focused on milk co-operatives, which keep a central position in the Indian milk sector. It is these co-operatives that will now be permitted to accept Rs 200,000 or more in cash for the purchase of milk on a bank holiday. This exemption supersedes the provisions of Section 269 ST of the Income Tax Act, which does not allow any cash transaction for more than ₹2 lakh in respect of a single transaction or a single operation. Presently, breaches of this provision attract fines and can precipitate an investigation.
In hopes of offering more fiscal manoeuvring, the government has aimed to exclude milk co-operatives from this ban. Shah said this would help cooperative societies to pay their members, mostly farmers in rural areas, on bank holidays without the loophole of being charged income tax.
Besides these measures, Shah also pointed out another huge exclusion for the cooperative sector, particularly in loans and deposits. Specifically, according to Section 269 SS of the ITA, any cash loans or any cash advances which exceed ₹ 20,000 are prohibited with a penalty which is equivalent to the value of the transaction. However, cooperatives will now be given exceptions to these restrictions to facilitate improved financial flow.
These reforms are in line with government-led prophecies that aim to enhance the development of the cooperative sector, which defines the limitations of long-term credits from commercial banks, hence the improvement of the rural and manufacturing base and the agricultural economy.
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