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Business News/ Politics / Policy/  Nearly 900 listed companies will gain if govt extends lower tax rate to bigger firms
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Nearly 900 listed companies will gain if govt extends lower tax rate to bigger firms

The government is planning to extend the benefit of lower tax rate to bigger firms by raising the revenue eligibility for companies to between Rs100 crore and Rs500 crore

The tax rate for companies with annual revenue of less than Rs50 crore a year was reduced to 25% from 30% in the Union Budget for the current fiscal. Photo: Hindustan TimesPremium
The tax rate for companies with annual revenue of less than Rs50 crore a year was reduced to 25% from 30% in the Union Budget for the current fiscal. Photo: Hindustan Times

Mumbai: Nearly 900 listed companies will stand to gain if the government extends the benefit of lower corporate tax rate at 25% to relatively bigger companies as well.

With tax revenue growth surpassing expectations in 2016-17, the government is now planning to raise the revenue eligibility for companies to anywhere between Rs100 crore and Rs500 crore subject to revenue implications of the move at the time of finalizing the budget for 2018-19, Mint reported on Monday.

The tax rate for companies with annual revenue of less than Rs50 crore a year was reduced to 25% from 30% in the Union Budget for the current fiscal.

“The broader objective is to promote employment, economic growth, expansion plans for the companies. The main objective is to give more money in the hands of the company," said Ravi Sundar Muthukrishnan, co-head of research at ICICI Securities Ltd.

The tax net of the government is widening as there is a thrust on moving to the organized sector from the unorganized one, post demonetisation, and the upcoming implementation of the goods and services tax (GST), which is scheduled for 1 July.

Finance minister Arun Jaitley in 2015 first proposed to cut corporate tax from 30% to 25% over the next four years.

The government plans to cut the tax rate to make Indian companies globally competitive and attract more investments to the country. Lowering the tax rate will become easier for the government as the tax base widens and compliance rate increases.

“This is done with the objective of facilitating SME and mid-sized companies. Of course, it also helps the larger objective of boosting employment and capex plans," said Dhananjay Sinha, head of research at Emkay Global Financial Services Ltd.

Apart from the huge unlisted universe, data from Capitaline showed that 889 companies listed on the BSE fall into this revenue category.

“By and large , it will bring down the bearing on effective tax too," said Muthukrishnan

“But what about the fiscal deficit? They (the government) will keep 2019 elections in mind, and many welfare schemes will go through meanwhile, and it remains to be seen how comfortable is the government fiscal deficit to meet these expenditure," said Muthukrishnan.

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Published: 01 May 2017, 02:41 PM IST
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