The Hindu Business Line : CII calls for corporate tax rate cut, removal of surcharge

THE Confederation of Indian Industry (CII) has urged the Government not only to reduce corporate tax rate from the existing 35 per cent to 30 per cent but also remove the surcharge of 2.5 per cent.

In its pre-Budget memorandum, the chamber has called for the withdrawal of dividend distribution tax. The memorandum has also made a case for the abolishment of minimum alternative tax (MAT) for all companies.

Besides the introduction of investment allowance, the chamber has also suggested that additional depreciation of 15 per cent be provided for increasing capacity by 10 per cent or more.

On indirect taxes, the CII has suggested that the peak customs duty be retained at 20 per cent during 2004-05. It has also recommended that the duty on raw materials, intermediates and components be reduced by five to 10 per cent wherever possible so that the import duty on raw materials and intermediates is at least five per cent lower than that on the finished products.

Further, it has appealed to the Government to remove all the remaining anomalies where the customs duty on inputs is more than that on the finished products. Anomalies should also be removed in cases where the finished products are on a list of items, which are given preferential access under free trade agreement (FTA), the CII memorandum has said.

The chamber has also suggested the doing away of zero per cent customs duty except for life-saving drugs and security-related items, and those agreed through multilateral or bilateral agreements. This includes the import of capital goods under zero per cent category for project imports and others.

Further, the memorandum has suggested that deemed export benefits be given to domestic producers where the project imports are allowed at five per cent duty. The CII has also held that imports of all major inputs for capital goods should be allowed at five per cent lower rate than the duty applicable on capital goods.

Further, it has suggested that the tariff lines be rationalised into a three-tier structure during 2005-06 at five per cent, 10 per cent and 15 per cent.

Besides, the chamber has said that companies must be allowed to modvat the various service taxes, which cascade on to the price of the finished goods and services. This should be done in two-ways — service tax credit against excise, and excise credit against service taxes.

The memorandum has also called for the reduction of Central sales tax to two per cent and removal of special excise duty of eight per cent on select goods (tyres, aerated soft drinks, polyester filament yarn, air-conditioners and certain categories of motor vehicles).

The chamber has also called for withdrawal of the national calamity contingent duty in the Budget.

Further, the CII has said that it believes that given the present buoyant economic regime this is the right time to implement the Kelkar Committee recommendation of a 14 per cent general rate of excise duty.