Doing business in the city just got costlier. Corporation of Chennai on Monday hiked company tax by 30 times.
Company tax levied by the corporation based on an establishment's paid up capital (for companies headquartered in the city) or profit (firms with branches here) was last revised in 1993. Officials said the rate was outdated and too low.
Private limited companies with a paid-up capital of 50 lakh and more registered with the Registrar of Companies and headquartered in Chennai will have to pay the civic body 30,000 every six months, or 60,000 every year. This is a massive hike from the 1,000 that commercial establishments were paying every six months since 1993.
The civic body has so far identified 34,260 companies that will have to pay the tax.
"Earlier there was no tax slab for firms with paid-up capital of 50 lakh and more. There was a blanket slab for all companies with a capital of 10 lakh and more, so even multinational companies paid only 2,000 a year for a civic body licence," a corporation revenue officer said.
"Because of the low revenues from taxes, many initiatives and welfare projects faced a fund crunch," a corporation official said. Civic body officials said the value of the rupee had fallen by around 300% since the early '90s, when the tax was last revised and companies' revenues had increased exponentially in the period.
Corporation officials argued the new rates were fair and only large, profitable companies will feel the pinch. The 1993 tax slabs were for paid-up capital of 1 lakh, 2 lakh and so on, till 10 lakh and more. Firms had to pay anywhere between 100 and 1,000 as company tax.
"Under the new slabs, any company with paid-up capital of less than 1,00,000 will have to pay 1,000 every six months," said the official.
Companies not based or headquartered in the city, but have only a branch or outlet will be taxed based on income. These companies will also pay a higher rate. "Earlier there was a blanket slab for companies earning 20,000 and more. They had to pay 1,000. A company not headquartered in Chennai will now have to pay 2,000 for an income of 20 lakh and 500 for every extra lakh in profits. ," the official said. "Any company will feel the pinch of paying 60,000. The magnitude of the hike is too large," said Rafeeque Ahamed, chairman of Tamil Nadu State Council, FICCI.