Pre-Budget Discussions

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.