Foreign cos may pay less tax here in Q2

MUMBAI: Advance tax collection from overseas firms is set to drop sharply in the September quarter, as the global slowdown has affected their Indian operations as well.

Prominent among these are foreign banks such as Citibank, Deutsche Bank, Bank of America and Barclays Bank. Like almost every manufacturing and service sector, banks have been hit by the economic slowdown. Most global banks have suffered losses in retail banking, while some have faced a setback in the form of reduced opportunities in corporate banking. There are also banks that are facing a shortage of capital due to global recession.

Citibank���s advance tax installment for the September quarter fell 21% to Rs 240 crore, while Deutsche Bank���s tax payment was down by over half to Rs 122 crore. Similarly, Bank of America���s tax outgo dipped 46% to Rs 9 crore, while Barclays Bank���s numbers showed a marginal decline of 3% to Rs 95 crore.

The numbers from HSBC, however, provided relief to tax collectors, as the British banking major paid Rs 245 crore as advance tax for the September quarter, which was 39% higher than what it paid in the corresponding quarter last year.

The international division of the I-T department, which collects taxes from Indian arms of overseas entities, has to meet a collection target of about Rs 9,000 crore in 2009-10. If the tax mop-up doesn���t improve in the next quarter, it will be difficult for the division to meet this fiscal year���s target.

The division had exceeded the target of Rs 8,000 crore for 2008-09 by Rs 3,000 crore. To make up for the shortfall, the I-T department is expected to make a tax demand on all recent cross-border acquisitions that involve Indian companies, such as Vodafone-Hutchison, Idea Cellular and Foster���s India-SABMiller.

Vodafone had moved the Supreme Court challenging the I-T department���s jurisdiction over a transaction that had been executed abroad between two overseas parties. However, the SC had asked Vodafone to go back to the I-T department to settle the dispute over tax jurisdiction.