Manufacturing companies will have to shell out an additional Rs 25,500 crore on 2 per cent increase excise duty for the financial year 2010-11. The rise in excise duty accounts for 21 per cent of profit before tax of manufacturing companies studied here.
A study by the Business Standard Research Bureau shows that 1,670 manufacturing companies (excluding oil and gas) accounted for 7.84 per cent or Rs 100,018 crore of the gross revenue for the year 2008-09. So, a 2 per cent increase in the excise duty on gross sales of Rs 12, 75,748 crore will fetch Rs 21,500 crore more revenue for the government.
Data collected from the annual reports of listed companies show that excise duty was 8-10 per cent of gross sales of automobiles, auto ancillaries, agro chemicals, chemicals, steel, non-ferrous metals and tyres. For consumer durables, fertilisers, paper, pharmaceuticals and textiles, the duty is around 5 per cent of gross sales. It was over 10 per cent for cement and paint companies, while for beverages and tobacco sectors, it was over 38 per cent.
The corporate sector expected to save Rs 2,100 crore tax account as the Union Budget for 2010-11 has reduced the current surcharge of 10 per cent on domestic companies to 7.5 per cent. The public sector companies expected to largest beneficiary with saving of around Rs 1,000 crore.
The public sector oil and gas major, ONGC will save Rs 240 crore while the public sector banks expected to save Rs 173 crore. The saving for the private sector oil and gas major Reliance Industries likely to be around Rs 27 crore.
Among public sector companies, State Bank of India, Steel Authority of India, NMDC and BHEL are expected to save over Rs 50 crore each while Punjab National Bank, Gail, NTPC, Oil India and Bank of Baroda are expected to save over Rs 25 crore each.
The revision of the rate of Minimum Alternate Tax (MAT) from the current 15 per cent to 18 per cent of book profits expected to fetch the government additional revenue of around Rs 4,035 crore in the financial year 2010-11.
The study is based on 998 companies which paid corporate tax at the rate of 15 per cent and below in 2008-09. The rise in MAT to 18 per cent of book profits is expected to affect the pre-tax profit of the 998 companies by around 3 per cent.
The MAT burden for the top 10 companies in the list is expected to increase by Rs 2,000 crore in 2010-11. Reliance Industries (additional MAT of Rs 536 crore), NTPC (+Rs 279 crore), Bharti Airtel (+Rs 275 crore), Reliance Communication (+Rs 186 crore) and TCS (+Rs 184 crore) which paid corporate tax below 15 per cent in the financial year 2008-09 are likely to be affected most from the new proposal.
Source: Business Standard