FINANCE MINISTER WITH INDUSTRIALISTS -

The Union Finance Minister, Shri P. Chidambaram met representatives of industries, their associations and chambers of commerce as part of his pre-budget consultations with various interest groups and experts. The Finance Minister opened the discussion by requesting the participants to give their views on important issues concerning their sectors particularly with a view to creating more jobs and having higher value addition.

Some of the important suggestions made by the participants during the meeting are as follows:

General

• Abolish/modify the Fringe Benefit Tax (FBT) or earmark it for improving infrastructure facilities.
• Abolish Central Sales Tax (CST) in the next two years.
• Provide incentives to Research and Development (R&D) activities, especially in R&D intensive sectors, like drugs and pharmaceuticals and IT through fiscal and non-fiscal measures.
• Include "infrastructure sector" in the priority sector definition for credit and adopt a uniform and stable definition of infrastructure to ensure level playing field.
• Encourage innovation in various technology -driven sectors.
• Focus on consolidation and improving compliance rather than increasing tax rates.
• Discourage export of raw materials.
• Restore rate of depreciation for taxation purposes back to 25 per cent.
• Harmonize stamp duty for real estate at 4 per cent.
• Ensure better accountability of expenditure in the social sector (especially in creation of human resources).
• Ease merger and demerger norms.
• Bring the rich agriculturalists under personal income tax.
• Rationalise and bring down aggregate indirect taxes on manufacturing.
• Provide incentives to labour intensive sectors.
• Remove all taxes other than a general tax on goods and services (GST).
• Introduce flexible labour laws.
• Reward industries for adopting practices those are less polluting than the norms specified.
• Spell out the targets for customs duty reduction and present a framework to guide convergence of customs duties to ASEAN levels.
• Provide relief for MAT against investment.

Industry Specific

Power

• Remove the existing disparity in tax treatment among generation, transmission and distribution.
• Provide incentives for modernization and expansion in addition to new capacity creation.
• Extend 80IA to 2011.
• Qualify pipelines and LNG facilities as infrastructure.

Food Processing Industries

• Encourage industries that use renewable raw material.
• Generate more demand for processed food by reducing excise duty, and creating consumer awareness.
• Create a taxation structure on the basis of value addition in the food processing industry.
• Do not provide disincentives to brand creation.
• Factor in state level taxes in countervailing duties while reducing customs duties.
• Extend area specific exemptions on excise duties in areas that hold good promise for IT and Electronics industries.

Small Scale Enterprises (SSI)

• Remove tax on cash withdrawal for SSI.
• Increase limit for excise audit Rs.3 crore and rationalize excise duty rates to provide phasing in of the increase.
• Do not reduce customs duties any further.
• Do not tax duty drawback under Income tax.
• Ensure faster resolution of NPAs.
• Abolish service tax on auxiliary units.
• Exclude wire drawing industry from the realm of manufacturing.
• Enhance accessibility of timely credit to this sector through targeted channeling of funds through banks/financial institutions.
• Replace requirement of C forms from quarterly basis to an annual basis.

Drugs and Pharmaceuticals

• Extend weighted deduction benefit to a period of ten years, increase the weight from 150 per cent to 200 per cent and enlarge the scope of eligibility under this head.
• Do not impose price control on this competitive industry.
• Do away with dividend distribution tax.
• Bring down excise duty on formulation from 16 per cent to 8 per cent.
• Provide seed fund for R&D activities on an annual basis.

Telecommunications

• Decrease the total tax burden on this sector.
• Abolish 'entry level' taxes.
• Ensure uniformity of taxes for all types of service providers and across all states.
• Scrap Access Deficit Charge (ADC).
• Ease bank guarantee norms and allow concerns to avail of credit on corporate guarantee.

Information Technology

• Emphasize quality higher education to ensure steady supply of the most important raw material for this sector, trained manpower.
• Provide easier and better accessibility to student loans for higher education.
• Accelerate the speed of urban renewal and provide incentives for creation of such urban facilities.
• Synergise IT application in governance.
• Review the definition of export turnover in the context of the IT sector.
• Review foreign tax credit policy and make it simpler and faster.
• Discourage taxation of parent companies abroad.
• Treat IT and BPO sector uniformly for taxation (especially Fringe Benefit Tax) purposes.