Slowdown-hit India Inc has wish list ready for next governmentMarch 22nd, 2009 - 1:46 pm ICT by IANS
By Pupul Dutta
New Delhi, March 22 (IANS) Hit by a demand slowdown and meltdown in the global economy, India Inc has its wish list ready for the next government, with sector-specific policy reforms and tax sops on top of the agenda to tide over the crisis.
The ailing export sector, which in October witnessed a decline for the first time in a decade due to the contraction in global trade, has sought an exemption from paying income tax for some five years to deal with the turmoil.
“Since the export sector is an employment-oriented industry, we should be exempted from paying income tax for five years,” said A. Sakthivel, president of the Federation of Indian Export Organisations (FIEO).
“We want a separate policy for the export sector that can be drafted after the government analyses what the global market situation is. The policy should take into consideration what other competing countries are doing,” Sakthivel told IANS.
According to the federation, promoted by the commerce ministry, the export sector lost about 500,000 jobs during the third quarter of this fiscal and it was imperative to formulate a separate policy to help arrest this ominous trend.
Another sector that has been a significant contributor both for fresh jobs and exports in the past, the information technology industry, wants the service tax schemes to be simplified and an extension of sops available on exports to spur growth.
Section 10A of the Income Tax Act exempts payment of tax on incomes from any newly established firm in a free trade zone, while section 10B extends a similar sop on income from any newly established 100 percent export-oriented undertaking.
An extension in the validity of sections 10A and 10B till 2010 and rationalising excise, service tax and surcharge on direct taxes will help industry cope with falling profits, said the National Association of Software and Service Companies (Nasscom).
“Since ours is a skill-based industry, we need constant upgradation of the education system so that we have enhanced capacity and capability to service the world,” Nasscom president Som Mittal told IANS.
He also hoped for a people-oriented regular budget from the next government - one that will focus on a unified taxation system, with minimum tax burden on the common man, apart from increased allocation for infrastructure and social sectors like education and health.
“We would appreciate a uniform tax regime with a common goods and services tax,” Mittal said.
For the automobile sector, which has had a good run in the past decade, continuity in policy is the main plank. Beyond that, the representative organisation - the Society for Indian Automobile Manufacturers (SIAM) - does not have a long wish list.
“We want the next government to continue with the auto policy spelt out in 2002,” said SIAM director general Dilip Chenoy, explaining that it calls for automatic approval of foreign investment up to 100 percent with no minimum investment criteria.
Similarly, the gems and jewellery sector, which has seen some large-scale job cuts in recent months, also has its own set of demands. It accounts for exports worth $21 billion and employs some 1.3 million people, of which some 800,000 people are in the diamond cutting and polishing trade.
“This sector gives good business every year. The next government should put more stress on this industry, especially to help the workers who had to be laid off,” said Vasant Mehta, chairman of the Gems and Jewellery Export Promotion Council.
Speaking for the industry at large, the Associated Chambers of Commerce and Industry of India(Assocham) said the next regular budget should introduce the general sales tax system and remove the irritants in the present value-added tax regime.
“Service tax has become a massive money-spinner for the government. It would be even more so as the economy moves to seeing higher percentage of its gross domestic product (GDP) come from services,” added Assocham.
“It must be recognized that any further increase in the rate of taxation would dissuade compliance and compel tax avoidance innovations by trade, especially at the grassroots level, due to the complexity of collection and bureaucratic harassment in remitting it.”
(Pupul Dutta can be contacted at email@example.com)
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Tags: commerce ministry, demand slowdown, direct taxes, excise, export sector, free trade zone, global economy, income tax act, india inc, indian export organisations, information technology industry, market situation, meltdown, ominous trend, policy reforms, section 10a, section 10b, sop, tax schemes, tax sops