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HUL sets up a wholly-owned manufacturing subsidiary

HUL, Hindustan Unilever, Manufacturing, Subsidiary

HUL sets up a wholly-owned manufacturing subsidiary

MUMBAI: Hindustan Unilever (HUL) is probably the primary large company to take advantage of the lower corporate tax by announcing the fixing of a 100% subsidiary for greenfield manufacturing. The FMCG major on Monday said its board of directors approved a proposal to make a 100% subsidiary to assist the company “become more agile and customer-focused”. The government had slashed the company rate from 30% to 22%, and for brand spanking new manufacturing entities the company rate was brought right down to 15%.

HUL, which may be a market leader in several FMCG categories, falls under the 22% corporate income bracket, however, new manufacturing units found out by the wholly-owned subsidiary, which is yet to be named, would attract a lower rate of 15%. the company features a window to line up manufacturing units under HUL would be taxed at this rate decided by the new subsidiary before March 2023.

The new subsidiary will have an authorized share capital of Rs 2,000 crore. Tt’s expected to become operational in 12-18 months. Rs 500-800 crore is predicted to travel into fixing FMCG manufacturing units as an initial investment under the new entity. “The law on the new tax regime is obvious and there’s a thrust on investments,” said Phatak.
Other manufacturing companies may follow the instance of HUL. Tax and company law advocate Mohamed Nawaz Haindaday said, “Under the new company tax regime, a corporation choosing the rate of 15% can anticipate to improving its margins or profitability at the value of forsaking the carryover of unutilized depreciation and depart losses. Such corporates would lose on the MAT (minimum alternate tax) credits which they might have otherwise paid and accumulated under the upper rate regime.”

HUL has 28 manufacturing units across India. The Rs 38,000-crore company employs about 18,000 people. consistent with the company’s annual report for 2018-19, HUL has 10 wholly-owned subsidiaries and 1 during which HUL has 80% ownership.

HUL CFO Srinivas Phatak told TOI, “The move is in alignment with the government’s ‘Make in India’ initiative and it’ll also create new employment. we’ll explore all possibilities in manufacturing under the new subsidiary. It could also mean that a number of the products that are currently imported, might be manufactured locally.”

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