India Inc has informed the ministry of finance that the government can unlock a whopping Rs 50,000 crore in revenue if it fast-tracks cases related to direct and indirect taxes that are pending in various tribunals and courts. The Confederation of Indian Industry ( CII) senior director Marut Sengupta said this constitutes about one- fourth of the Rs 2,00,000 crore that has been held up for a long time in various disputes related to corporate and income tax, excise tax and services tax. The recommendation was made by the CII delegation, including industrialists Sunil Kant Munjal, Arun Bharat Ram and Suneet Maheshwari, chief executive officer ( CEO) of L& T Infrastructure Finance Co, to revenue secretary P. V. Bhide in the run- up to the Budget 2010- 11.
In its memorandum to the finance ministry, CII has stated that this measure would help reduce the fiscal deficit to five per cent of gross domestic product ( GDP) over the next fiscal from the current budgeted level of 6.8 per cent. In indirect taxes, CII has recommended continuation of 10 per cent rate of peak customs duty.
” Any reduction in customs duty at this juncture would be counter- productive as the surge in imports from countries extraordinarily supporting their domestic industry could mar the recovery prospects of domestic industry,” the prebudget memorandum said.
India Inc is already worried over the influx of cheap Chinese goods in various sectors. The government has been forced to impose anti- dumping duty on some of these goods while investigations are still on in other cases, such as vehicle tyres.
However, it has recommended the abolition of customs duty on inputs such as non- coking coal, petroleum coke, scrap of nonferrous metals and ferro- nickel to reduce the input cost of the user of these industries. CII is also in favour of continuation of the general rate of excise duties at eight per cent level as the green shoots of recovery have barely taken roots, pointed out the memorandum.
On the recommendations pertaining pertaining to direct taxes, CII is against amendments being made with retrospective effect as a general principle, said the memorandum. It has asked for reduction in the minimum alternate tax ( MAT) rate. Further, it has demanded extension of the sunset clause under section 10 A and 10 B beyond March 31, 2011 for five years on the ground that the IT/ ITeS sector is a key contributor to forex earnings and many companies are in the process of setting up undertakings in this area.
Given the fact that investment levels are low, the memorandum has stressed the need for special fiscal incentives to provide boost to this segment. Among other measures, it has suggested increase in depreciation rates on plant and machinery to 25 per cent and extension of the scope of investment- linked- taxincentive – currently being offered to select sectors – to the entire manufacturing sector.
The apex business chamber is apprehensive that the government may withdraw some of the excise duty reductions, which were given as part of the economic stimulus packages to spur growth.
CII has also highlighted the need to raise Rs 40,000 crore through disinvestment. Revenues from these two sources, along with that from higher tax collection and auction of telecom spectrum next year, could easily result in a saving of 0.8 percentage points in fiscal deficit, projected the memorandum.