In its pre-budget memorandum submitted to the Finance Minister, Pranab Mukherjee the chamber has also suggested the government to consider extending service tax net to other items for increased revenue generation.
“The government can consider selective increase in customs duty on import of items other than input materials and capital goods, besides, stake sale in PSUs is another feasible option to generate additional revenue and reduce soaring fiscal deficit,” said ASSOCHAM.
“Central sales tax (CST) rate must be cut from 2 per cent to 1 per cent to accelerate implementation of the Goods and Services Tax (GST) which is likely to push the country's economic growth by 1.4 per cent to 1.6 per cent and might add Rs.1.50-lakh crore annually to the government's kitty,” the chamber said while stressing upon the need for tax reforms.
ASSOCHAM has also urged the government to restore the CENVAT (Central Value Added Tax) credit of input taxes paid on setting up new manufacturing units, service establishments, on materials and services used in civil construction for installing machinery.
“Restoration of CENVAT credit is imperative to encourage fresh investments as it is also a fundamental principle of GST,” said ASSOCHAM.
The chamber has also emphasised that apart from services mentioned in the negative list and which are currently taxed by the state governments under constitution like entertainment, rent and others, all other services must be taxed comprehensively to add to the government’s revenues.
The ASSOCHAM has also recommended the government to provide tax sops to sectors with a high employment generation potential like – civil construction, IT, ports, roads, telecom and textiles.
Natural gas must be listed in the list of ‘Goods of Special Importance’ under Section 14 of the Central Sales Tax Act so that it is uniformly taxed at a lower rate across all states on the lines of commodities like crude oil, coal and steel. More so, as natural gas is a significant input in industries like fertilizer, power and gets transported throughout the country, said the apex chamber.
Apart from this the government should also do away with indirect taxes on inputs and services used in setting up infrastructure projects during investment phase to attract investment.
Surcharge and education cess should be removed as it will generate more surpluses in the hands of companies with consequential impact on investments and growth in view of the global recession.
In case there is a delay in the enactment of the Direct Taxes Code which is to be introduced from April 1, ASSOCHAM has urged the government to maintain the Personal Tax rates as per the proposed DTC.
Exemption limit of reimbursement of medical expenses for employee and his/her family should be enhanced to Rs 50,000 per annum from the present ceiling of Rs 15,000 per annum in view of the rising cost of healthcare in India.
Exemption limits in respect of house rent allowance, transport allowance, kids' education allowance and rent free accommodation should be enhanced considerably as expenses incurred in respect of above have increased significantly due to rising cost of living in light of the high rate of inflation.
The chamber has advocated introducing a weighted deduction of 150 per cent of the expenditure incurred on Corporate Social Responsibility (CSR) activities specifically covering critical areas like education, health, animal husbandry, water management, waste management, women empowerment, poverty eradication, rural development and even companies with a dedicated CSR trust or foundation.
Exemption limit for payment of leave encashment as notified by the Central Board of Direct Taxes (CBDT) in accordance with powers given under section 10 (10AA) of Rs three lakhs (since 1988) should be raised to Rs 10 lakhs with immediate effect.
Discrimination between domestic companies having Indian subsidiaries and those with overseas subsidiaries be removed as it is leading to uncertainty and risk of double taxation on income from overseas investment in the absence of a well defined foreign tax credit system.
A simplified scheme for obtaining PAN in case of expatriate Indians should be introduced.
The overall limit of Rs one lakh under The Finance Act, 2006 must be increased to at least Rs 2.5 lakhs to accommodate for the expanded list, this would also act as a fillip to boost investments especially, as standard deduction has been removed.
The chamber has also stressed upon levying safeguard and anti-dumping duty to protect Indian industry from dumping of goods by other countries due to low demand in European Union and the United States, especially in case of imports from China.
Private sector must be encouraged to build storage infrastructure for agri-produce and imported commodities including petro products by providing fiscal incentive as this will help moderate inflation and spur economic growth. Besides, interest rates should also be moderated since the inflation has started abating.
Source : indiablooms.com