Corporate tax cut to help top 1,000 firms save Rs 37K cr: Report

New Delhi, September 22 (IANS): Around 1,000 companies would save nearly Rs 37,000 crore due to recent corporate tax rate cut, according to a Crisil report on Sunday.


A study of nearly 1,000 companies, spread across 80 sectors, which cover over 70 per cent of the National Stock Exchange's market capitalisation indicates that effective tax rates had risen over the past five years.


These companies, including oil & gas and financial services, account for nearly one third of the tax paid by India Inc. "Our analysis indicates these companies could see tax savings of Rs 37,000 crore, or nearly a fourth of the total savings anticipated by the government," the report by Crisil Research said.


Segments linked to consumer would benefit the most given higher effective tax rates of over 30 per cent, it said and added, exports-linked sectors, such as IT and pharma, on the other hand, would benefit the least, accounting for only 5-6 per cent of potential savings because they already enjoyed low effective tax rates.


Finance Minister Nirmala Sitharaman reduced the corporate tax on companies with a turnover of up to Rs 400 crore to 25 per cent in the Budget presented on July 5. This brought down the effective tax rate on over 99 per cent of companies to 27.8 per cent. For the rest less than 1 per cent, the effective rate remained at 34.94. This category of large turnover companies, such as Reliance Industries, Tatas, Aditya Birla Group, are the biggest beneficiary of Sitharaman's latest tax breaks.


"Tax benefits will 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," as per the analysis of 70 firms that account for 20 per cent of the market.


Tax experts said reduction in the corporate tax would benefit large companies, like Reliance, Tata, Vedanta and Adani, more than medium-sized firms.