The pre-Budget memorandum of the Confederation of Indian Industry (CII) has supported the option to the small-scale sector to pay 4 per cent excise duty without central value-added tax (Cenvat) credit above the revised exemption limit of Rs 1 crore.
The chamber has welcomed the recommendations of the Kelkar task force for the gradual reduction in the excise exemption limit from Rs 1 crore to Rs 0.5 crore by 2005-06 for the small industry to avail of the excise duty concessions.
CII has also sought rationalisation of the excise duty structure as well as the withdrawal of the additional excise duty with effect from April 1, 2003, when the value-added tax (VAT) is implemented across the country. Such measures would reduce procedural hassles and simplify the existing tax net, it added.
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In order to achieve a 12 per cent growth rate in real terms, the small-scale sector would require both resources and commitment, the association said, adding that those should not be mistaken for incentives or subsidies.
After exemptions were removed, if necessary, relief should be provided through transparent budgetary support, it said.
On the indirect tax front, the memorandum has recommended the switchover to an 8-digit classification code from the current 6-digit code in order to reduce classification disputes, both in excise and Customs.
CII has suggested a 5 per cent decrease in the rate of corporate tax, which will allow industry to generate more internal resources for further deployment.
It has further said the process of tax deduction at source (TDS) should be simplified, and the limit for compulsory audit should be enhanced to Rs 1 crore from Rs 0.4 crore at present.
However, the memorandum is not in favour of aligning the depreciation for income tax with the rates permitted under the Companies Act because the average tax liability will be increased to 30 per cent from 22 per cent now.
Other issues that have been highlighted include the additional depreciation of 15 per cent, capital gains exemption to sick small-scale sector units disposing their assets to repay defaulted bank loans, permitting depreciation on goodwill and small-value assets, and the 100 per cent depreciation for computer equipment.