Sandeep Dikshit
Tribune News Service
New Delhi, September 23
India has thrown a huge carrot to companies willing to set up new manufacturing capabilities by a drastic cut in corporate tax, but Finance Minister Nirmala Sitharaman's largesse has left some sectors in a happy situation, some will continue with business as usual while quite a few will have to calculate the trade-off between opting for the new regime or continuing with the old rates that come packaged with concessions.
The IT sector, India's biggest success story of the past two decades, remains nonplussed and will continue to do so till export-based tax incentives are phased out, if at all. Most IT companies such as TCS, Mphasis, L&T Infotech and Tech Mahindra already pay effective corporate tax rate below the offered 25.2% and may not feel enthused to tick the option column.
It is a double bonanza for most real estate companies since the lower tax will afford them some headroom to work their way out of trouble, especially for companies specialising in EPC (engineering, procurement and consultancy) besides some well- known names such as Brigade Reality, Ashiana Housing and NCC that are paying effective corporate tax of 30% or higher. In case the government is able to activate the Rs 10,000-crore fund for half-built properties that are not NPA and are non-NCLT, it will be a double benefit for companies with clean balance sheets.
Oil and gas companies are certain to shift to the lower corporate tax regime except for refiners because they pay taxes much below the offered 25.17%. The rest of the sector, ranging from domestic gas suppliers to exploration companies, will be tempted to shift enmasse.
A similar story will play out in the steel sector where Jindal Stainless, Tata Steel and Kalyani Steel can count themselves among the gainers but many companies that have reported accumulated losses such as SAIL, Jindal Steel and Uttam Galva may not find it an attractive proposition.
The rise of e-commerce has led to an upswing in the fortunes of logistics companies and several majors, including Blue Dart, TCI Express and Mahindra Logistics while Adani Ports and TCI will not be similarly inclined.
The reaction in the consumer goods sector will be mixed. The gainers will be Hindustan Unilever, ITC, Nestle, Britannia, GSK and Tata Global Beverages but Dabur India, Marico and Godrej Consumer will not be enthused.
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