Big­gest tax­payer RIL pays 20%

The Times of India (New Delhi edition) - - Times Nation -

An ex­emp­tion-free tax rate of 22% — 25.17% in­clud­ing cesses and sur­charge — sounds at­trac­tive, but an anal­y­sis of the tax li­a­bil­ity of firms listed in Sen­sex sug­gests more than half have rea­son to stick to the ex­ist­ing tax regime.

Bud­get data shows the av­er­age ef­fec­tive tax rate (ETR) — taxes as a per­cent­age of pre­tax prof­its — for roughly 8.4 lakh firms that filed re­turns for 2017-18 was just over 29%. A TOI anal­y­sis of the 21 non­fi­nan­cial firms in the Sen­sex shows only 10 faced an ETR of over 25% in 2018-19. The re­main­ing 11 had an ETR be­low the 25.17% that they would have to shell out if they mi­grated to the new regime.

Banks and fi­nan­cial sec­tor firms were ex­cluded from the anal­y­sis be­cause their taxes are cal­cu­lated some­what dif­fer­ently (mainly be­cause of pro­vi­sion­ing) and in­clud­ing them might have dis­torted the over­all pic­ture. Af­ter ex­clud­ing the nine fi­nan­cial sec­tor firms in the sen­sex, the over­all av­er­age ETR worked out to 22.9% in 2018-19. But in­di­vid­ual ETRs vary widely — from Sun Pharma with a neg­a­tive tax bur­den of 13.5%, to Tata Steel, which paid 35% of pre-tax prof­its as tax.

The ac­tual tax paid can, how­ever, in­clude re­funds for ex­tra tax paid in ear­lier years or ad­di­tional li­a­bil­ity for de­ferred taxes (ETR1 in the ac­com­pa­ny­ing graphic). We there­fore looked also at the cur­rent tax as a per­cent­age of the profit be­fore taxes (ETR2 in the graphic). By this mea­sure, the av­er­age for th­ese 21 firms was 25.7%, close to what the new regime would of­fer.

Again, about half the firms might not have a com­pelling rea­son to make the shift. Even firms just over the 25% mark in this chart might think twice since once ex­emp­tions are given up they can­not be availed of in fu­ture. Hav­ing said that, a num­ber of cor­po­rate tax spe­cial­ists TOI spoke to said most large com­pa­nies would tran­si­tion to the new regime be­cause over the last sev­eral years, ex­emp­tions have been whit­tled down.

No­tably, al­most all IT firms are be­low the 25% ETR level — clearly be­cause of tax in­cen­tives given to the sec­tor — as is Reliance In­dus­tries, the com­pany pay­ing the high­est taxes on this list but with an ETR of barely 20% if one looks at the cur­rent tax li­a­bil­ity.



Hindustan Unilever

Larsen & Toubro

Maruti Suzuki In­dia

Oil & Nat­u­ral Gas Corp

Asian Paints

Ba­jaj Auto


Tata Con­sul­tancy Ser­vices

HCL Tech­nolo­gies


Power Grid Corp of In­dia

Reliance In­dus­tries

Tech Mahindra

Mahindra & Mahindra

Tata Mo­tors


Bharti Air­tel

Sun Phar­ma­ceu­ti­cal In­dus­tries


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