2,706 BSE-listed companies to gain from cut in corporate tax rate

Over 2,700 companies listed on the Bombay Stock Exchange (BSE) are likely to gain from the proposed cut in corporate tax rate to 25% proposed by Budget 2018 from the existing 30%.

A quick check based on the full financial year net sales reported by companies for the financial year 2016 – 17 (FY17) suggests that there are 2,706 listed companies on the BSE that have reported consolidated net sales less than Rs 250 crore, or Rs 2.5 billion, for the full financial year where this tax benefit has been extended, ACE Equity data show.

Some of the companies that comprise this list includes MT Educare, Unity Infraprojects, Som Distilleries, Everest Kanto Cylinder, Adlabs Entertainment, Thiru Arooran Sugars, Zydus Wellness, ICRA Limited, Zicom Electronic Security Systems, Archies Limited, Majestic Auto and Binani Industries.

The government said the lower corporation tax for medium and small enterprises (MSMEs) would leave them with higher investible surplus, which could be used to create more jobs. “The lower corporate income tax rate for 99% of the companies will leave them with higher investible surplus which in turn will create more jobs,” Jaitley said in the speech.

Analysts have given a thumbs-up to the development and expect the surplus generated to aid in job creation. A bulk of MSME's, they feel, will stand to gain from the cut in corporate tax rate.

"The focus on rural development and the ‘common man’ was largely expected, but announcement of the new cost-plus formula for minimum support prices and the introduction of a LTCG tax on equity is a negative surprise. On the other hand, the corporate tax cut, commitment to medium-term fiscal consolidation and continued infrastructure spending are positives," said Sonal Varma, cheif India economist at Nomura in a note.

Amar Ambani, partner and head of research at IIFL believes the move will be beneficial for a number of non-banking finance companies and state finance boards (SFBs) that have a focus on small enterprise finance.

"The budget addresses needs of agricultural sector and MSMEs, through which agenda of inclusive growth, formalisation of economy and boost employment generation is targeted to be realised. The FM’s promise of reducing corporate tax rate from 30% to 25% for companies remains limited to the MSMES leaving the large tax payers to wait for another year. However, 99% of MSME’s with turnover of up to Rs 2.5 billion would benefit from the rate reduction," said a note from Deloitte India.

"Source:AceEquity

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