Is Budget unfavourable to corporates?

So a mundane Budget it seems - almost non-sensational. But wait, the devil is in the details and the details don't quite favour corporate India. The FM may not have tinkered with key tax rates, but he certainly has widened the base. Lots of minor moves that add upto a taxing Budget for corporate India. CNBC-TV18 reports that cement and IT companies will bear the worst brunt.

No change in key tax rates - you could say the Finance Minister did as his government promised. But that's not how cement and IT companies are seeing it this Wednesday. In the first such move of it's kind in India, the Finance Minister linked the excise tax rate on cement to it's selling price.

So it is a lower tax rate for a bag selling at less than Rs 190, and a 33% higher rate for a bag priced at more than Rs 190. The intention is to rein in prices and inflation - but it is not going down very well with the cement industry.
 
Also, taking it on the chin are IT companies. The FM has proposed an 11.33% Minimum Alternate Tax, or MAT, on the book profits of IT companies, who have so far enjoyed an exemption. The tech sector is bracing itself for a margin hit.

S Ramadorai, CEO & MD, TCS says, "There will certainly be a margin impact of about 1.5% - 1.6% as we see it today and on the basis of our understanding. But in case there is a clarity that evolves with regards to the offsets, then we need to recaliberate it, of course, assuming what we have understood, the implication is 1.6% in the margins on the profit after tax.

The news gets tougher - while the Finance Minister has left key tax rates untouched, he has imposed an additional  1% education cess on all taxes. The Dividend Distribution Tax rate will go up from 12.5% to 15% and ESOPs will now come with an FBT price tag, with the difference between the market value and ESOP issue price to be taxed as FBT - a whopping 30%.

The service tax threshold exemption limit has been doubled to Rs 8 lakh, which means over 2 lakh small service providers will go out of tax net. But several new services will now be taxed such as Works Contract, Renting of Commercial property and even offshore services.

On the flipside and as part of the inflation attack, the excise duty on petrol and diesel has been reduced from 8% to 6%. On the customs front, the peak rate has been brought down to 10% and import duties on several items like polyster yarns, plastics and medical equipment have been reduced to 7.5%.

But net-net, corporate India may have to share more of the spoils this year.