Business Daily from THE HINDU group of publications
Wednesday, Dec 26, 2007
ePaper | Mobile/PDA Version
Business Daily from THE HINDU group of publications Wednesday, Dec 26, 2007 ePaper | Mobile/PDA Version |
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Industry & Economy
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Budget Web Extras - Economy CII wants greater thrust on rural economy, competitiveness
On excise duty, it has recommended reduction of the CENVAT rate from 16 per cent to 14 per cent. On Service Tax, it has recommended bringing more services under the tax net to broaden the tax base. Our Bureau New Delhi, Dec. 25 Building people, strengthening rural economy and enhancing competitiveness are the key focus areas of the Pre-Budget Memorandum tabled by Confederation of Indian Industries (CII) for the financial year 2008-09.
The confederation believes that greater emphasis on the above areas could help India transform into a knowledge arbitrage economy from labour arbitrage economy. Shortage of skillsAccording to CII, attention towards skill development, employability and healthcare is essential in order to tackle the emerging shortage of skills in the country. The pre-budget memorandum for the year 2008-09 has suggested measures to encourage the industry to invest and organise in-house training programmes. To complement the efforts of formal education sector, CII has proposed that expenditure incurred by the industry in initial induction/training, re-training, re-skilling programmes be treated at par with R&D expenditure, eligible for deduction from Income Tax at 150 per cent. Further, in order to enhance health care services, the association has strongly recommended tax benefits under Section 80IA of the Income Tax Act. The CII has recommended investment and productivity enhancements in agriculture and allied sectors in order to strengthen the rural economy. According to the memorandum, poor infrastructure facilities are acting as barriers for the effective use of available inputs and farm services for higher productivity and in order to sustain private sector participation in this area, CII recommends permission for functioning of the private sector on a commercial basis with some tax incentives, which could complement the Government’s efforts to enhance the availability of farm inputs as well as extension services. Tax recommendations
On enhancing competitiveness, CII recommends a favourable taxation policy to encourage R&D by extending its benefits to all sectors under Section 35(2AB) of the Income Tax Act and reduce the overall tax burden to provide greater stimulus to GDP growth in general and to manufacturing in particular. The other major direct taxation recommendations of CII’s pre-budget memorandum are abolition of levy of surcharge on corporate taxes, abolition of dividend distribution tax or alternatively, reduction of the dividend distribution tax rate to 5 per cent along with re-introduction of Section 80M, abolition of MAT or alternatively the MAT rate could be brought down to 5 per cent. CII also recommends exclusion of the deeming provision of treating a portion of pure business expenses as personal expenses under fringe benefit tax and to only consider the element of personal benefit to employees for taxation under fringe benefit tax, to encourage corporate restructuring by providing benefits under Section 72A of the Income Tax Act, provide relief and encouragement to exporters by reintroducing deductions available under Sections 80HHC-80HHE of the Income Tax Act and to encourage availability of risk capital, extend pass through benefits under Section 10 (23FB) of Income Tax Act to Private Equity and Venture Capital Funds for investments in all sectors, amongst several others. Customs DutyThe major indirect taxation recommendations of CII’s pre-budget memorandum include continuation of the existing peak rate of custom duty of 10 per cent as imported goods have already become cheaper by 10.35 percent due to appreciation of rupee against the US dollar since March 1, 2007. In addition, CII has also recommended removal of anomalies in custom duty structure wherein duty rate on inputs is higher than duty rate on finished products. The association has also recommended custom duty reduction from 10 to 5 per cent on fuel oils like furnace oil and LSHS and reduction of custom duty from 5 per cent to 2 per cent on metallurgical coke with ash content below 12 per cent, non-coking coke and petroleum coke. The other CII recommendations include reduction of custom duty from 5 per cent to 2 per cent on naptha and liquefied propane, which are the basic feed stocks from petrochemicals. On excise duty, CII recommended reduction of the CENVAT rate from 16 per cent to 14 per cent. It has also recommended reduction of excise duty from 16 per cent to 8 per cent on certain goods such as processed foods, pesticides, drugs and medicines. In addition, CII has also suggested reduction of excise duty from 24 per cent to 14 per cent on cars, multi-utility vehicle and petrol driven goods transport vehicles. On Service Tax, CII has recommended bringing more services under the tax net to broaden the tax base. However, the industry association has asked for exemption of service tax on exploration, development and production activities related to oil and gas, construction activities for infrastructure and trade and industry associations. In addition, CII has sought exemption of service tax on input services availed by merchant exporters by refund mechanism. In case of Central Sales Tax, CII has recommended reduction of CST rates from 3 per cent to 2 per cent with effect from April 1, 2008 to phase out CST to facilitate transition to Goods and Services Tax (GST) and inclusion of natural gas in the list of ‘Declared Goods’. CII has also requested for announcement of a suitable GST model as a next step to be implemented by 2010. More Stories on : Budget | Industry Associations | Economy
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