India Inc. likely to pass on the pain
It’s a mixed bag of goodies for major corporate houses. While taxation departments and finance chiefs at big business houses were assessing the impact on their group finances, one thing became certain: corporate India was unwilling to absorb the hike in excise duties or the increased coverage and intensity of service tax and would look to pass these on to consumers.
The Ruia-controlled Essar Group anticipates an overall benefit from initiatives announced by finance minister Pranab Mukherjeee to boost investment in the power, steel and ports sectors. The group also expects to see reduced costs in the electricity sector. “Increased allocation for roads will lead to a higher demand for bitumen, which refiners like us will benefit from. It is good to note that the government has begun a pilot project of direct transfer of subsidy to buyers of kerosene and cooking gas,” said Essar Oil MD L.K. Gupta.
For the Mahindras, the negative impact of the higher excise duty on cars and tractors came with a sigh of relief that the government did not go after diesel vehicles. Even the hike in excise duty on automobiles is being seen by the industry as a reversal of the earlier stimulus.
The Anil Agarwal-controlled Vedanta group will be negatively impacted with the cess on petroleum oil produced in India being almost doubled to `4,500 per tonne. Cairn India would see cash flows being curtailed and this could affect expansion plans.
Cement firms such as Aditya Birla-owned UltraTech plan to hike cement prices by `2-3 per 50 kg bag to pass on the tax impact.
On the other hand, the Tatas, who have substantial businesses abroad, will benefit from the ability to remit dividends from overseas at almost half the normal corporate tax rate.
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