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Home > Business > Business Headline > Report

What I couldn't tell the FM (Part IV)

January 23, 2003 13:27 IST

With the Finance Minister deciding against holding pre-Budget meetings this year, this series looks at what leading businessmen, economists and politicians wanted to tell the minister, but couldn't do so.

P K Jain, president, PHDCCI

We have entered the Tenth Plan against the backdrop of sagging growth in manufacturing, and a general decline of investment demand. In the next fiscal, we should create an atmosphere for growth, revive demand and improve the investment climate. There is an urgent need to rein in the fiscal deficit.

The subsidy burden, at 14 per cent of the GDP should be reined in and government finances diverted to more productive use.

The divestment process should be hastened and the proceeds should be used for investment in infrastructure. The passage of the Fiscal Responsibility and Budget Management Bills should be expedited to ensure a qualitative change in the management of government finances.

On the indirect tax front, the value-added tax should be implemented with effect from April 1, 2003. More services should be brought under the tax net, as also farm income. Moreover, the minimum alternate tax should be abolished because it reduces corporate savings. Otherwise, relief from minimum alternate tax should be provided.

Sector-wise/Service tax

Kelkar says:

  • Service tax should be levied comprehensively, a few services could be left out by drawing up a negative list.
  • The rate of tax should be suitably enhanced to achieve parity with the Cenvat rate.
  • Two rates suggested, one for those who avail credit and a lower rate for those who do not, and
  • For service providers with less than Rs 10 lakh revenue, a nominal 1 per cent tax should be levied.


  • Cenvat credit should be given for service tax.
  • Provision for advance rulings should be brought into the service tax laws.
  • Technical know-how fees, tour operators and travel agents should be spared from service tax, and
  • Replace service tax in the telecom sector with VAT from April 1.

ICAI says:

  • Minimum exemption should be provided for the levy of service tax.
  • A schedule of taxable services should be prescribed.
  • Permit appeal against order denying refund of service tax, and
  • Reimbursement of out-of-pocket expenses should be spared from service tax.


  • Credit of service tax paid should be allowed to avoid cascading of taxes, and
  • Exclude design engineering and royalty payments from service tax.

Part - I, Part - II, Part - III

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Number of User Comments: 2

Sub: Kelkar report.

Though most of the suggetions such as abolition of dividend tax,capitol gain tax,reduction of corporate tax etc are O.K. abolition of deductions in respect of ...

Posted by M.R.KUDVA.

Sub: Kelkar Report - IT Rebate 2003-04

First of all we should thank our Finance Minister for making this kind of attempt to have discussions on tax proposals/reforms. I would like to ...

Posted by Venkatesan A



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