Patanjali is an NGO! Paying Tax? FMCG or Social Entrepreneurship?

What if Baba Ramdev's Patanjali Was Not an NGO And Paid Corporate Tax?

 

New Delhi: Baba Ramdev’s mega fast moving consumer goods (FMCG) firm, Patanjali recently collaborated with e-commerce platforms to expand the reach of its products. The Yoga guru also declared his plan to continue Patanjali as a non-governmental organization (NGO). However, what if Patanjali was a regular company that falls under the ambit of corporate tax?

Corporation tax is a tax levied on the net income of the company. Businesses, both private and public, which are registered in India under the Companies Act 1956, are liable to pay corporate tax currently pegged at 30%. Finance Minister Arun Jaitley in his last Union Budget talked about lowering corporate income tax to 25% in a span of four years for companies registering annual revenue of Rs 50 crore or less. The announcement is yet to be put in practice.

Founded in 2006, Haridwar-based Patanjali Ayurved clocked an annual revenue of Rs 10,561 crore in the financial year end of March 2017. Revenue registered for the financial year 2015-16 was Rs 5,000 crore and Rs 2,007 for the fiscal before that.

The Centre’s total collected tax revenue in the last financial year was Rs 17,10,000 crore. Had Patanjali been paying corporate tax, government revenues would have been close to 17,13,000, an increase of roughly 0.2 percent coming from a single organisation.

However, tax experts explained that there are exemptions and rebates that firms get from tax authorities on account of income generation source shown.

Further, it will be wrong to assume that Patanjali does not pay any tax at all. The basic difference between an NGO and a regular company is non-levy of corporate income tax because an NGO is not supposed to make profits on account of it being a holding company.

“Patanjali is a holding company. Smaller companies under it pay all the taxes for production of ultimate sale of products. Further, Patanjali also pays all other taxes such as service tax etc.,” explained DK Srivastava, chief economic expert, EY, a consultancy.

The Baba Ramdev and Acharya Balkrishna-led FMCG company has products across 50 categories such as pantry staples, groceries, nutrition, skin care and toiletries, with haircare and oral care products being the best sellers.

The NGO has currently partnered with eight e-commerce firms, including Amazon, Flipkart, Paytm Mall, Bigbasket, Netmeds, Grofers and Gurugram-based 1mg.

In addition to being available on the above sites, products will also be sold on Patanjali’s own online marketplace – patanjaliayurved.net.

“At present, Patanjali has an annual production capacity of Rs 50,000 crore,” claimed Baba Ramdev in January 2018.

As claimed by Baba Ramdev during a press conference, Patanjali has created an ecosystem that is capable of settling up to 1 million orders every day. The latest move to launch its own e-commerce operations is reportedly aimed at increasing online sales to around 15% of the company’s total sales.