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Moderate Corporate Tax & Step Up Infrastructure Investments: ASSOCHAM Print E-mail
Written by Viswanath   
Thursday, 04 June 2009
New Delhi: The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has urged the Finance Minister to step up investment in infrastructure, stimulate demand, moderate corporate tax, remove inadvertent custom duty structure and extend STPI to accelerate exports.

In a Pre-Budget Consultative Meeting with the Finance Minister, Mr. Pranab Mukherjee here today, ASSOCHAM Sr. Vice President President, Dr. Swati Piramal said that there is urgent need for upgrading India’s infrastructure to improve efficiency and sustain economic growth.

In the present context of slow down, investment in large infrastructure projects will generate significant employment and demand for basic goods like steel and cement.

The ASSOCHAM Sr. Vice President pointed out that slowdown in India’s economic growth, deceleration of industrial production and wide spread recessionary conditions in many other countries have shaken the consumers’ confidence, resulting in contraction of demand for goods and services.

There is urgent need to stimulate demand by reducing personal income tax rates by 5% points and increasing the threshold limit to Rs. 2 lakhs. Net tax saving in the hands of consumer will have multiplier effect on the demand for goods and services, higher saving will encourage them to commit even larger outflow through increased borrowing. For example on increase of Rs 10,000 in disposable income can influence them to buy assets like house or car worth 50000 more on installment payment.

Exports have been declining at a faster pace due to contraction in global demand for Indian goods and sharp reduction in their prices, making the exports unviable. New investment in export production capacity has virtually stopped. It is unlikely that World trade increase till next year end, in such a difficult global environment.

The ASSOCHAM also said that it was imperative to make export attractive by extending the income tax exemption under Section 10A/10B to the export units set up under EOU and STPI Schemes by 3 years, which are otherwise expiring on 31 March 2010.

On the issue of corporate tax, Dr. Piramal said, “economic slowdown has sharply eroded corporate profits which led to depressed primary market and lower corporate lending by banks. This has resulted in deferment of industrial investment which in turn has led to lesser employment opportunities. It is recommended that corporate tax rate be reduced to 25% . This would help in reviving the primary capital market and encourage banks and other financial entities to lend more funds to the industry for expansion”.

In addition, the ASSOCHAM has asked the government to remove inverted Custom Duty structure, arguing that some of Indigenous manufacturers are having adverse impact of the inverted duty structure on their products where the customs duty rate on import of input raw material is higher than the duty on finished products in which these are used. Such anomalies should be corrected immediately so that indigenous goods do not suffer from unfair competition from imports.

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