The Hindu : National : India Inc. pays more corporate tax: study

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Monday, Jan 02, 2006

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India Inc. pays more corporate tax: study

Special Correspondent

AEP study findings suggest noteworthy growth in corporate tax collections in manufacturing segment

NEW DELHI: In sharp contrast to the public sector companies' contribution to the Government exchequer by way of corporate tax, India Inc's share has more than doubled in the last four years.

A study by Assocham released on Sunday said the share of top 50 business houses had shot up by 189 per cent to touch Rs.8,995 crores in 2004-`05, against Rs.3,102 crores in 2001-`02. The state-owned firms contribution rose by 67 per cent during the same period.

However, the total corporate tax paid by all business houses went up by 159 per cent in the last four years, the Assocham Eco Pulse (AEP) study said.

It also revealed that corporate tax liability of other business houses (besides the top 50) in the private sector rose to Rs.4,340 crores from Rs.2,050 crores during the same period.

The private sector as a whole, including all types of ownerships excluding foreign, increased their corporate tax liability by 138 per cent at Rs.16,809 crores against Rs.7,068 crores during the last four years.

The study said the total corporate tax paid by the PSUs grew at an average annual rate of 16 per cent during the last four years compared to 35 per cent in the case of the private sector.

It attributed the low growth of PSUs' share in the total corporate tax paid to the fact that the oil marketing companies have been burdened with under-recoveries on the sale of petroleum products while telecom companies have also paid lesser advance tax than what they did last year.

The state-owned banks have also followed suit because of lower treasury income from trading in government securities.

Excessive government intervention and multiple administrative and procedural bottlenecks have cast a shadow on the expansion of PSUs and diversification curbed the growth of their net worth, thereby contracting prospects of higher corporate tax contribution with the exchequer, the study said.

On the other hand, India Inc was brimming with confidence and was set to make its mark with higher profitability and a large number of mergers and acquisitions. Assocham Eco Pulse study findings suggested that though corporate tax collections have risen across all industry groups the growth was noteworthy in the case of the manufacturing segment, which exhibited an increase of 152 per cent during the last four years as against the 72 per cent increase in the services sector.

The manufacturing sector's contribution to the corporate tax kitty of the exchequer has scaled up from Rs.8,498 crores in 2001-`02 to Rs.21,586 crores in 2004-`05. In this sector also it was the metal and metal products industry, including ferrous metals such as pig and sponge iron, steel, castings and forgings and non-ferrous metals such as aluminium and aluminium products, that registered a 518 per cent growth in its corporate tax liability during the same period.

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