CII-Karnataka urges state govt to target 10% growth in GSDP

Recommends amendment of Karnataka Sales Tax Act

In a pre-budget memorandum submitted to the state government on Tuesday, Confederation of Indian Industry (CII)-Karnataka urged the government to look beyond issues of taxation and procedures, and also focus upon the broad macro-level policy changes that are needed in order to give an upward push to Karnataka's GDP growth.

CII-Karnataka has recommended that the state government should target a 10 per cent increase in Gross State Domestic Product (GSDP) in order to keep pace with the sustained growth of Indian economy.

In addition, it has suggested that investments in the farm sector should be carried out to tackle situations like drought and poor monsoon, and improve the growth of the primary sector, pushing for an industrial growth rate of 10 to 12 per cent by looking beyond IT for creating jobs and setting up more manufacturing industries, reducing state fiscal deficit to 3 per cent of GSDP and identifying growth centres and reforming public expenditure to shift resources towards infrastructure development where funds are needed.

While acknowledging that the problem of cascading effect of tax and multiple tax rates is expected to be mitigated through the introduction of VAT, CII has recommended re-alignment and rationalisation of tax rates in the present situation.

It is recommended that the number of tax rates be brought down from 12 to a five-tier structure, of 0, 4, 8 and 12 per cent with petroleum and petro-related products being charged at 20 per cent. Further, it is recommended that the tax rate on industrial inputs, raw materials and components is phased down to 2 per cent in line with the phased reduction of CST by the Government of India.

With a view to give a boost to Export Oriented Units (EOUs) in the state, CII Karnataka also recommended amendment of the Karnataka Sales Tax Act suitably, to accommodate inter EOU sales, as eligible for exemption from sales tax and has also requested amendment.

With a view to improve development in the state, CII has recommended a seven-point agenda to the government.

The state should improve investment climate by linking the rate of growth of infrastructure with the rate of growth of population in the state to promote equitable growth, improvement of state highways and districts roads, envisaging a greater role for KIADB and KSIIDC in developing a conducive environment for investment in the state.

CII has added that the export performance can be improved by strengthening the logistics for easier clearance at ICDs and ports, time bound-completion of major infrastructure project such as Bangalore International Airport and the Hassan-Mangalore Railway link, providing incentives to financial institutions to encourage export finance, providing a conducive investment climate for EOUs and EPZs and completion of focused export promotion infrastructure such as Electronic Hardware Park, as early as possible.

The industry body has also stated that the state government should target 5 per cent growth in agriculture through use of large and medium size irrigation projects and small scale water harvesting initiatives.

"Impetus to manufacturing should be given by encouraging privatisation of State Public Enterprises operating in potential growth sectors and focus should be on carrying out power reforms. An investor-friendly environment should be created in the BPO, healthcare and agri-based biotechnology sectors. Also tourism should be marketed effectively and the tax structures of the state hotel industry should be simplified," CII has noted.

CII has also added that with regard to industrialisation of backward areas, units should be granted a 100 per cent tax exemption for the first five years and thereafter 30 per cent for another five years.