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Budget: What the industry wants
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January 26, 2005 07:11 IST

With just over a month to for Budget 2005, corporate India has begun lobbying hard for accelerated growth in manufacturing and suggested a slew of measures to help India attain 8 per cent GDP growth.

In a pre-budget memorandum to Finance Minister P Chidambaram, the Confederation of Indian Industry has said that for the Indian economy to grow at 8 per cent the manufacturing sector will have to achieve double-digit growth in coming years.

To achieve this growth, it is critical to raise investment levels both from domestic and foreign sources.

To raise investment rates, it is essential to convert government's revenue deficit into a surplus as this will add to the domestic savings pool and keep the cost of capital at internationally competitive levels, said the CII.

The CII also said:

The other recommendations by the CII include:

Direct Taxes

I. Corporate Taxation

II. Individual Taxation

This would facilitate the objective of giving tax exemption in all cases where such double benefit is not envisaged. The amendment would also enable practical utilisation of this benefit - since the provision can hardly be used in its current form, where a foreign company would depute an expatriate employee to India without carrying on any business activities.

Indirect Taxes

Customs Duties

1. CII's general recommendations for customs duty structure

2. Anomalies in customs duty structures

Remove existing anomalies in customs duty structure and any anomalies arising out of further reduction of duty rates.  Examples of anomalies in customs duty structure are given below :

Aluminium

Electricity meters

Glycerine

3. CII's specific recommendations for customs duty reduction

i) Reduce customs duty on crude palm oil from 65 per cent to 45 per cent for the benefit of the people.

ii) Reduce customs duty from 30 per cent to 15 per cent on crude glycerine for refining.

iii) Reduce customs duty from 20 per cent to 10 per cent on:

iv) Reduce customs duty from 20 per cent to 5 per cent on CNC systems and its parts for manufacture of machine tools without any end use condition.

v) Reduce Customs duty from 15 per cent to 10 per cent on Copper.

vi) Reduce customs duty from 15 per cent to 5 per cent on aluminium, copper scrap and  limestone with silica content of less than 0.6 per cent.

vii)  Reduce Customs duty from 10 per cent to 5 per cent on

Excise duties

I.  General rate of excise duty

In India total incidence of tax on goods in very high taking into account 16 per cent excise duty and 12 per cent sales tax on most of the products.

Keeping this in view, the Task Force on Indirect Taxes headed by Vijay Kelkar made an important recommendation that general CENVAT rate should be brought down from 16 per cent to 14 per cent.

In the recent Report of the Task Force on Implementation of the Fiscal Responsibility and Management Act submitted in June, 2004, 12 per cent standard rate of excise has been recommended.

CII recommends reduction of CENVAT rate of 16 per cent to 14 per cent in the budget 2005.

II. Special Excise Duty (SED)

Aerated soft drinks, air-conditioners, motor cars & multiutility vehicles, polyester filament yarn, tyres and tubes attract 8 per cent SED in addition to 16 per cent excise duty.

CII recommends that 8 per cent SED should be withdrawn.

III. CII's recommendations for reduction of excise duty

i) Reduce Excise duty from 16 per cent to 8 per cent on the Following items from 16 per cent to 8 per cent:

ii) Reduce excise duty on vanaspati from Rs 1.25 to Re 1 per kg to bring at par with excise duty on refined edible oils.

iii) Waive excise duty on ferro alloy slag as it has no commercial value.

iv) Exempt excise duty on packing materials for fertilizers to reduce cost and subsidy.

v) Reduce excise duty on molasses from Rs 500 to Rs 200 per tonne.

vi) Exempt excise duty on all equipment supplied to R&D industries/IIT's as CVD in exempted on imported equipment.

vii) Extend NIL excise duty benefit on bogies and couplers from any other manufacture when required for production of wagons for Railways.

IV. National Calamity Contingent Duty (NCCD)

National Calamity Contingent Duty is a surcharge by way of duty of excise and it was imposed vide Section 136 of the Finance Act 2001 on pan masala, chewing tobacco and cigarettes.  In para 110 of the Budget speech 2001, finance minister has mentioned that this is being imposed to discourage use of these products on health grounds.

Subsequently 1 per cent NCCD was imposed on PFY, motor cars, multiutility vehicles and two wheelers and Rs. 50 per ton on crude oil vide Section 169 of Finance Act, 2003 and it was mentioned that it will be limited to one year only, i.e. up to February 29, 2004. It was extended to March 31, 2005 in Finance Act (1) of 2004.

CII recommends that NCCD on these products should be allowed to lapse on March 31, 2005 and there should be no further extension.

V. Eight-digit product classification in excise

Introduce eight digit classification code in Central Excise at par with the Customs HS Code.

VI. Abatement percentage on retail sale price

Set up an Advisory Committee to look into the matters related to abatement as recommended by the Task Force on Indirect Taxes.

Central Sales Tax (CST)

The earlier proposal to reduce the rate Central Sales Tax from 4 per cent to 2 per cent on introduction of state level VAT should be implemented from April 1, 2005 to reduce the cascading effect of CST and increase the competitiveness of Indian industry.

Assessees should be given the option to print 'C' form on this own stationery with mandatory provision of pre-authentication by the designated officers of the company.


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