Tax expenses of infra companies up: Assocham Study
According to the Assocham Financial Pulse (AFP) Study, tax expenses of companies enjoying benefits of Infrastructure Status have gone up by 90.3% in the first quarter of current fiscal as against those that are denied such benefits under category of Infrastructure Status. The reason – the study says – is due to perceptible improvements in realizations which contributed to better margins and improved bottomlines of such companies and increased their tax liabilities.
Under current statues, infrastructure status in conferred upon industries and companies engaged in activities like building expressways, highways, airports, ports and rapid urban rail transport systems. The sectors that are denied infrastructure status as per law of land includes hospitality (hotels), real estate, power and healthcare.
The Study reveals that in hospitality (hotels) sector, tax expenses registered a negative growth of 131.2% as compared to corresponding period last fiscal. In real estate, corporates tax expenses also recorded a negative growth of 82.1% during the period.
However, corporates engaged in power and healthcare sector, the tax expenses between April – June 2009 recorded a marginal growth of 31.2% and 21.1% respectively.
Some of the analysed corporates falling under beneficial category of Infrastructure Status whose tax expenses recorded an average growth of 90.3 per cent in first quarter of 2009-10 comprised Gammon Infrastructure Projects Ltd (25.4%), GMR Infrastructure (67.9%), Lanco Infratech (182.1%) and Supreme Infrastructure (85.7%).
The analysis carried out by the AFP Study took into account four infrastructure status seeking sector viz real estate, power, health care and hospitality (hotels) for their comparative analysis with the infrastructure sector companies into activities like building expressways, highways, airports, ports and repaid urban rail transport systems.
“In order to drive the Indian economy on a serious institutional reform led growth, infrastructure still remains one of the most critical issues requiring a fresh look at the core level” said Sajjan Jindal, president, Assocham.
According to the Section 80-IA of the Indian Income Tax Act which allows a 10-year tax holiday to infrastructure developers, the sunset clause kicks in pretty soon and industry expects this scheme being kept alive for another 10 years. In this budget, only the power sector has been given a one-year extension.
The Chamber chief added “Infrastructure is considered to be one of the biggest constraints confronting the Indian economy which draw a thin line of distinction between being one of the fastest emerging economies and the supreme status of the fastest growing super-economic power”. As per the Study findings based on the parameters signifying the benefits that accrue to infrastructure sector, per se, found no major difference between the performance of the general infrastructure sector with four sectors seeking the infrastructure status viz real estate, power, health care and hospitality (hotels).
On the interest cost parameter, the real estate sector was found to be in maximum divergence with the general infrastructure sector with the growth in interest rate cost at nearly 97% versus 64.3% growth in the interest cost of companies in the infrastructure sector.