The duty cuts and export restrictions imposed by the government to control inflation may only have a marginal impact, economists have said. The long-term solution, they say, is to boost agricultural production to enable the sector to ride out of the current slump.
"If the tax holiday is withdrawn, STPIs will lose the level-playing field vis-a-vis special economic zones. We have recommended that the government either withdraw the tax holiday to SEZs or continue the incentive to IT companies," an official with knowledge of the deliberations told Business Standard. STPIs enjoy direct tax exemption under sections 10A and 10B of the Income-Tax Act, 1961. The benefits are scheduled to expire on March 31, 2009.
The project is aimed at meeting the manpower requirements of India's rapidly growing economy, which currently faces a huge skill deficit at all levels of the job chain. The mission, which is expected to start functioning in four to five months from now, will be chaired by Prime Minister Manmohan Singh who will head an "apex committee" with Planning Commission Deputy Chairman Montek Singh Ahluwalia as the vice-chairman.
While the economy has been averaging an annual growth rate of around 8.7 per cent for the last five years, the unorganised manufacturing sector is slowing down.
Tasked with gathering over Rs 6,87,715 crore (or nearly $168 billion) as revenue receipts in 2008-09, the two agencies the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC) will be headed by a succession of bureaucrats with unusually short tenures.
NSSF collections are down by 68% over last year. Investors are preferring banks, mutual funds and insurance policies for investments over the National Small Savings Fund. In order to deploy the surplus, the NSSF plans to lend Rs 1,500 crore to India Infrastructure Finance Company Ltd at 9 per cent interest. To save the fund from collapsing, the finance ministry included 5-year Post Office Time Deposits and Senior Citizens' Saving Scheme under Section 80C for tax exemption.
Some large companies said the measure would broaden and deepen the equity cult in the country, but feel that a blanket 25 per cent minimum public shareholding norm should not be applied indiscriminately to all companies. The ministry had floated the paper on February 1 and asked for public comments by the month-end. The minimum public shareholding limit now is 10 per cent.
The proposal, which will be one of the biggest capital market reforms in recent years if it is implemented, has been made by a Group on the Review of Issue Process, which is likely to submit a report on Thursday or Friday.
Transfer pricing legislation was introduced in India in 2001 and has emerged as the single biggest source of courtroom battles between Indian tax authorities and companies, a large number of which are multinationals with operations in India.
Finance Minister P Chidambaram may introduce Controlled Foreign Companies rules to tax income from Indian-owned foreign subsidiaries. That means, irrespective of whether the income is brought to India or parked outside, Indian tax rates will be have to be paid on such income.
The empowered committee of state fnance ministers had recommended to the finance ministry that the Centre should provide direct budgetary support and transfer more services to states on account of the rate cut, sources said. States have refused to hike the value-added tax rate on more than 250 items like drugs, agricultural and industrial inputs from 4 per cent to 5 per cent to make up for revenue loss.
Even as the debate over off-Budget liabilities continues, former finance ministry bureaucrats and leading economists say it's time the government went beyond the targets in the Fiscal Responsibility and Budget Management Act.
The proposal is being examined by the finance ministry in the run-up to Budget 2008-09. The banks have told Finance Minister P Chidambaram that there is a considerable divergence between the provisions made according to the RBI guidelines and the deductions allowed by the Income Tax Act.
Many financial sector reforms suggested by the Percy Mistry Committee may not figure in Budget 2008-09.
The Reserve Bank of India has told parliamentarians that it is concerned over the stock market exposure of various non-banking financial companies (NBFCs) promoted by leading banks in the country.
FM is considering extension of the sunset clause for housing projects in Budge 208-09.
Demat of TDS certificates is likely to be deferred by a year or at least six months.
Professional sportspeople may soon have to pay at least 10.3 per cent as tax on their match fees and money for endorsing corporate logos on their apparel and other gear.
The finance ministry is considering a proposal to advance the due date for filing income tax returns by two months for all direct taxpayers, both salaried individuals and companies.
"This is the result of tighter fiscal discipline imposed by the fiscal responsibility framework ... and an optimistic revenue outlook driven by the buoyancy in revenue collections during the last three years of the 10th Plan," the 11th Plan document points out.
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