Textile sector to become competitive

The city seems to have taken a broader world view in their judgement of this year's Budget.

Digvijay Kapadiya, president, All India Federation of Cloth Retailers' Association, said: "The establishment of yarn depots for easy availability and reduction in excise duty on man-made polyester fibre and filament yarn will reduce the rates of man-made fabrics. Large provision of funds for modernisation of textile mills, power loom sector, handloom sector and jute will make production faster and cheaper. Provision of huge funds to impact education will help eradicate illiteracy and in turn benefit in long run. The abolition of 1/6 Scheme and no increase in tax rates are also good. But no big fillip to savings and no declaration of Economic Tax exemption Zone in Maharashtra will further migrate industrial units from Maharashtra."

Hemant Rathi, senior vice-president, Maharashtra Chamber of Commerce, Industry & Agriculture (MACCIA) said, "The finance minister has not paid much attention and did not bring the developmental changes for industry and business. Firstly, we welcome the proposals like new investment in infrastructure projects, higher allocation for rural electrification, hardware development units and finance for them. Textile and technology upgradation scheme will give short in the arm for the ailing textile industry. The SSIs in the service sector will be eligible for SIDBI financing, similar to manufacturing sector. The power generation capacity is to be enhanced, by allocating additional funds. There is no change in personal and corporate tax rates and no more new taxes. The abolishment of 1/6 scheme, rate of tax under MAT on book profits raised from 7 to 10% and extension of MAT credit from 5 to 7 years are laudable. Besides, Reduction on 2% interest of crop loan will encourage investment in the agri sector."

The Budget has evoked mixed response from the industry associations in Nashik.

Speaking to Business Standard, Dhananjay Bele, president, Ambad Industries and Manufacturers Association (AIMA) said, "No special provisions have been made for small scale industries (SSIs). On the contrary, the de-reservation of 180 products will affect the SSI sector to a large extent. Also the demands of the SSI sector with regard to fringe benefit tax (FBT) and excise duty have been completely ignored."

Bele added: "The provisions made for rural sector and infrastructure are welcomed. On one hand, the finance minister has reduced the interest rates on agricultural loans for farmers to 7 per cent, but no concessions have been given for the industrial sector. At this juncture, how will the GDP projected for the 2006-07 be achieved is the major question," said Bele.

"We are totally disappointed for proposing the following changes. The FM has lost the opportunity and put the co-operative Banks on back foot by withdrawing their concession under Section 80 B, 54 EC and 54 EB. The rate of tax increase from 7.5% on book profits criteria to 10% in certain cases. Section 80 B has been extended for all persons except co-operative banks is unjustified. 54 EC & EB Benefit will be given only to NHB and others but not for co-operative & other banks.

The Charitable Institutions receiving anonymous donations will be taxed at highest 30% is very harsh provision and may be impracticable as it is impossible to keep record of small donors, say less than Rs 1,000 and they are being taxed at the highest rate is not justifiable, Hemant Rathi said.

"By continuing banking cash transactions tax, the Finance Minister has continued to give hardships to a common business man. There is no much change in VAT. The assured rate reduction of CST is not done. However, by including LPG domestic for taxation, it will bring tears to common man. Service Tax has been continued and new Services like ATM Services, Management Services, Registrar and Share Transfer Services, Sponsorship Services, other than sports, container services on rail, International Auctioneering, Ship Management and Public Relations Management services have been included, which will lead to inflation and it is day light robbery on the pockets of the business community. Service tax general rate has also been raised from 10% to 12%," Rathi said.

"The provisions of FBT are creating enormous hardships to the assessee and continuation of this tax will create problems to Trade & Industry. The de-derisoryreservations of 180 items from S.S.I. Sector will further cripple the SSI units and lead to massive unemployment. Increasing limit of FII will lead to artificial inflationary trend in the Stock Market The increased income by higher Sales of Automobiles due to reduction of excise duty should be used to develop good roads besides Golden Quadrilateral. But Finance Minister has failed to give such promise," Rathi, senior vice-president, MACCIA added.

Rajendra Chhaed, president, Laghu Udyog Bharati, Nashik, said, "The Budget is a balanced budget. As usual, the rural development schemes, agro development schemes, infrastructural development schemes and educational schemes have been introduced. For the SSI sector, the FM has reduced Excise duty on many items is laudable, but simultaneously he has increased service tax from 10 per cent to 12 per cent, which was not expected. As far as VAT is concerned, few states were not covered. Now, the FM has declared that all the states will be covered under the VAT from the 1st April 06, so ultimately CST will be demolished. We were expecting Fringe Benefit Tax to be abolished, but the FM has done only simplification in the tax. Moreover, it is appreciated that no changes have been made in direct and indirect taxes, which is certainly going to benefit the common people. In nutshell, I must say that the government has given in one hand and has again taken back with the other hand."