Top 1,000 firms may save `37K cr in tax, says Crisil
Hyderabad, Sept. 22: Dr.Reddy’s Laboratories on Sunday said that it is suspending supply of its drug ranitidine worldwide as a precautionary measure, following the ongoing probe by the US Food and Drug Administration into the reported impurity Nnitrosodimethylamine in it at low levels.
Ranitidine is an over-thecounter (OTC) and prescription drug, which decreases the amount of acid created by the stomach.
“Dr.Reddy’s is still evaluating potential impact of the issue. As a precautionary measure, Dr.Reddy’s is suspending all shipments worldwide of ranitidine products until the investigation (by the FDA) outcome is available. We have both a prescription and an over-thecounter portfolio of the product,” Dr.Reddy’s spokesperson told in an email reply. The FDA has been investigating NDMA and other nitrosamine impurities in blood pressure and heart failure medicines such as valsartan since last year.
Aurobindo Pharma, Torrent Pharmaceuticals, Hetero Labs and many other multinationals have voluntarily recalled hypertension drug valsartan from the USA market following the alleged cancer causing impurityNDMA. Around 1,000 companies could see tax savings of Rs 37,000 crore, largely on account of the reduction in corporate tax, said Crisil.
Segments linked to the consumer would benefit the most given higher effective tax rates of over 30 per cent. Exports-linked sectors such as IT and pharma, on the other hand, would benefit the least, with only 5-6 per cent potential savings, as they already enjoy low effective tax rates, the rating agency said.
“Over the past few days, a slew of measures have been introduced to address the slowdown in the Indian economy. Friday’s announcement, however, is the most material. Given that we expect 5-6 per cent growth in India Inc revenues and Ebidta for this fiscal, the savings could end up a tad higher. Tax benefits would also vary within sub-segments. For instance, with the consumption space — assessment of automobile manufacturers that account for 50 per cent of volumes sold indicates that tax cuts may have limited benefits because of already lower effective tax rates. But auto component manufacturers, which bear higher effective tax rates, may see maximum gains, an analysis of 70 firms that account for 20 per cent of the market, showed,” said Crisil Research.
“Our interactions with players in the consumption space also indicate an intent to pass on benefits from these in the form of discounts and tactical price shifts to gain market share,” it added.
Domestic companies incorporated on or after October 1, 2019, and making fresh investments in manufacturing, have the option to pay income tax at the rate of 15 per cent. This benefit is available to companies that would commence production on or before March
31, 2023, while meeting some conditions. The effective tax rate then shall be
17.01 per cent inclusive of surcharge and cess.