The Finance Minister should consider removing two per cent Customs duty for Roch Phosphate and Sulphur imports. That would be a major step towards giving a fillip to the fertiliser industry. Capital expenditure for urea-gas conversion should be subsidised and have tax breaks.
The one per cent countervailing duty on phosphate fertiliser imports should be removed to provide a level playing field. The finance minister should also consider reducing Customs duty on DAP imports to two per cent, from five per cent currently.
Gas allocation for SPIC’s Tuticorin plant from Ramnad district gas field should be announced in this Budget. Subsidy payment on account should be increased to 100 per cent from 85 per cent currently. That would reduce the hedging cost for manufacturers and reduce fertiliser price. Ammonium chloride should also be brought under NBS.
The industry also expects a reduction in duty on some of the chemicals being imported or bought at international parity pricing.
While introduction of the Goods and Service Tax Act to replace the CST Act would be of general benefit to industry, it appears that introduction of GST would take some time. So, an immediate reduction of CST to one per cent from two per cent would help reduce input costs across all industries.
Corporate income tax rate should be reduced from the base rate to 25 per cent, with surcharge and cess being withdrawn, in view of the difficult macroeconomic environment.
The distribution tax may be brought down to 10 per cent so that companies are able to increase the actual cash distributed to investors. This would encourage further investment in the capital market.
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Depreciation on plant & machinery was reduced from 25 per cent to 15 per cent a couple of years ago. Further, many incentives like 80IA, 80 HHC, etc, had been withdrawn. These have increased companies’ tax burden, and the cash surplus has been reduced. In order to encourage companies to invest more in asset addition, the depreciation rates may be increased to 25 per cent for plant and machinery.
Interest paid on tax dues needs to be allowed as business expenditure (if an assessee had paid the tax on time, the interest on normal borrowing relatable to the tax payment would have been allowed as deduction).
Ashwin C Muthiah
Chairman, Southern Petrochemical Industries Corporation (SPIC)