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At
the meeting with the officials of the Finance Ministry
chaired by Revenue Secretary, P.V. Bhide, the industry
chamber has stressed the need to implement GST at the
earliest so that cascading effect of taxes is removed form
indigenous manufacturing and services cost, transaction
cost is reduced and trade and industry grow faster by
taking advantage of scale economy and efficient supply
chain.
The
process of replacing existing complex indirect tax system
by GST should be initiated in the forthcoming Union Budget
by taking initial steps towards GST, according to ASSOCHAM.
It has suggested that the CST rate should be reduced from
3% to 2% as a step towards creating Indian common market.
Excise and service tax be integrated into Central GST
during 2008-09 and sugar & textiles should be brought
from special duty regime to VAT regime, ASSOCHAM adds.
The
ASSOCHAM delegation says that the manufactured goods are
still quite expensive. Therefore, a reduction in the
excise duty rate to 12% will make them affordable to
larger population and will boost their demand,
accelerating the manufacturing sector’s growth with
minimum impact on revenue. Such reduction will also align
the tax rates under excise and service tax, facilitating
their integration under Central GST. The excise duty rate
on automobiles should also be moderated by removing the
special excise duty on this sector, the chamber says.
To
upgrade the country's infrastructure significantly to
sustain economic growth, ASSOCHAM President Venugopal N.
Dhoot says that service tax and excise duty on inputs
during the investment phase should be exempted from tax or
refunded. Tax may be collected once the projects are put
to use and start earning revenue, he adds.
At
present, a large number of Indian companies are investing
overseas for profitable growth and strategic advantage.
Any dividend remittance by such foreign companies to India
attracts full tax even where such profit from which
dividend is remitted has suffered tax in the host country.
This has led to Indian companies setting up head offices
abroad or parking funds overseas.
Many
countries exempt such dividend where the shareholding is
substantial (20% to 40%), ASSOCHAM says. India should
promote itself as a headquarter of business enterprises
and retain long term capital in India by exempting
dividend remitted by foreign subsidiaries or associates
with 40% or more investment, it adds. Alternatively the
tax paid on profit from which dividend is declared should
be given credit.
ASSOCHAM
suggests the creation of an Agriculture Economic Zone on
the line of SEZ, in order to achieve the agriculture
growth of at least 4% on the sustainable basis. The
Government will have to ensure adequate investments in the
areas like pre & post harvest management, food
processing, export promotion related activities, specific
crop related activities and application of the R&D to
the agricultural production, the chamber adds.
In
order to ensure that there is adequate quality produce,
investment in irrigation, transport, rural electrification
and telecom will be required apart from pre and post
harvesting activities, feels ASSOCHAM. This will help
develop rural infrastructure as well as provide employment
to people engaged in agriculture, it adds.
For
a strong research base and pool of intellectual
properties, ASSOCHAM proposes that scientific research in
emerging sectors like bio-technology, nanotechnology,
industrial deigns, IT, telecom, food processing, medicines
and engineering should be given favourable tax treatment
under direct and indirect taxes to encourage such
activities and the double taxation of intellectual
properties under service tax and VAT regime should be
discontinued.
Source
: India Infoline.com - Mumbay, India, dated 21/11/2007
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