This format is already embraced by many of the world's economic powerhouses.
A company that produces biscuits, shoes and steel pipes can run each of these businesses as stand-alone divisions of the parent company; and from a taxation point of view, consolidate their profits and losses to arrive at a single assessable taxable value. Now consider an infrastructure player.
Any medium-sized player will have 20 to 30 special purpose vehicles (SPVS), while larger players may have to contend with over 50 of them at any point of time. These SPVs are so called because they represent a stand-alone project. Infra developers operate across a variety of SPVs, encompassing a spectrum of operating contracts from a simple construction project to more complicated concession agreements, especially under public-private partnership dispensations.
Such concessions, or contracts, can become quite complicated, as concession-granting authorities, financiers and regulators insist on isolating each project as a separate legal entity with specific cash flows, loan liabilities, and deliverables. The difficulty is that with each SPV being a separate legal entity, every one of them has to file a separate income tax return.
Moreover, infra companies prefer to operate with a portfolio approach, balancing the potential profits and losses of different projects over long time periods to give an overall acceptable return. But the "single SPV" status does not allow them to do so vis-à-vis taxation.
This practice, while serving various regulatory and financial purposes, has inadvertently become a double-edged sword, creating business inefficiencies and stunting growth in this capital-intensive sector.
この記事は Business Standard の August 16, 2024 版に掲載されています。
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7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、9,000 以上の雑誌や新聞にアクセスしてください。
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