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Witholding tax threatens future of ECBs
The withholding tax introduced in this budget will increase the tax burden on external commercial borrowings (ECBs) of corporates and banks. The estimated cumulative figure of $4 billion put clouds on the future of ECBs as a debt instrument. The interest costs of major corporates such as Reliance Industries and Telco are expected to go up by 20 per cent. This comes in addition to the 1-2 per cent additional cost of borrowing after the negative ratings posted by international rating agencies and a depreciation of the Indian rupee by 15 per cent in the last one year. He spokesman for Reliance Industries said the tax would impact external borrowings.