The proposal to cut the surcharge on corporate tax from 5 per cent to 2.50 per cent will lead to savings worth Rs 900 crore (Rs 9 billion) for the corporate sector.
The assumption on savings is based on the tax paid by 2,550 companies during the nine months ended 2002.
These companies had made a tax provision of Rs 26,992 crore (Rs 269.92 billion) during the nine months ended December 2002. On an annualised basis, the aggregate corporate tax is pegged at Rs 35,999 crore (Rs 359.99 billion).
Effectively, tax savings for the entire corporate sector following the cut in surcharge will be little over Rs 1,100 crore (Rs 11 billion). This is because during 2002-03, the government collected surcharge worth Rs 2,235 crore (Rs 22.35 billion) from corporates.
However, following the move, the government may witness revenue loss worth Rs 500 crore (Rs 5 billion) in 2003-04.
This is because the aggregate corporate tax for 20043-04 is seen at Rs 51,499 crore (Rs 514.99 billion) compared with Rs 44,700 crore (Rs 447 billion) in 2002-03.
Public sector companies and banks will share nearly half of the benefits accrued on account of the reduced surcharge. The major gainer of the proposal will be the Oil & Natural Gas Corporation.
The State Bank of India, which paid a tax of Rs 2,932 crore (Rs 29.32 billion) during the nine months of 2002-03, will save Rs 98 crore (Rs 980 million).
Indian Oil Corporation will save Rs 61 crore (Rs 610 million), ICICI Bank Rs 47 crore (Rs 470 million) and Bank of Baroda and Bank of India around Rs 25 crore (Rs 250 million) each.
Among private sector firms, ITC tops the list with likely tax savings of around Rs 18 crore (Rs 180 million).