Top 1,000 Companies Could Save Tax Worth Rs. 37,000 Crore

A slew of measures has been introduced over the last few days to curb the sluggish economy. One of which included the reduction in basic corporate tax rate for domestic companies to 22 per cent from 30 per cent. According to a recent CRISIL analysis on tax-saving impact, it has shed some interesting insights. According to the agency, more than 25,000 companies have made profits in fiscal 2018 and contributed nearly 60 per cent of the tax paid by this companies (1,074 of them). That said, with revenue of Rs 1,000 crore or more collected with the highest effective tax rate of 27 per cent, this companies accounted for nearly 40 per cent of the total corporate tax revenues, and nearly 80 per cent of tax collected.

This indicated that the companies in the highest bracket accounted for a larger proportion of taxes and would be the larger beneficiary given the higher tax rates. As per the CRISIL Research’s analysis of nearly 1,000 companies spread across more than 80 sectors which covered more than 70 per cent of NSE’s market capitalisation indicated that the effective tax rates have increases over the past 5 years. These companies included sectors like oil & gas and financial services accounted for nearly a third of the tax paid by India Inc. Out of these 1,000 companies nearly 250 were in losses in fiscal 2019 and could not pay the taxes. Also, nearly 40 per cent of them had an effective tax rate of more than 30 per cent.

Falling back on the CRISIL analysis, these 1,000 companies could see tax savings of Rs 37,000 crore, or nearly a fourth of the total savings anticipated by the government. The agency estimates are based on profit before tax for fiscal 2019 and expects 5-6 per cent growth in India Inc revenues. “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, accounting for only 5 per cent – 6 per cent of potential savings. That’s because they already enjoy low effective tax rates,” said an analyst at CRISIL.