The Associated Chambers of Commerce and Industry of India (Assocham) has suggested a uniform 16 per cent excise duty and increased spending on infrastructure projects to stimulate demand and reverse the declining industrial growth.
In a presentation to the Union finance ministry, Assocham also urged the government to raise the monetary limit of income tax to Rs one lakh under the 10 per cent tax rate slab and to Rs 1-2 lakh under the 20 per cent rate slab, an Assocham release said.
It also called for broadbasing the tax structure by reducing exemptions along with moderations of rates and bringing the entire service sector under a 'cenvatable' service tax. It suggested integration and replacement of different indirect levies by a comprehensive national value added tax (VAT).
"The Central sales tax (CST) should be abolished to make India a single common market and remove cascading effect of tax on inter-state transactions to enable the industry to achieve the economies of scale in manufacturing and use technology to reduce their manufacturing and distribution costs," it said.
Seeking a correction in inverted customs duty structure in some products, Assocham said the customs duty on all raw materials should be kept at 60-70 per cent level of the duty rate on finished goods that use those raw materials. To promote India as a global sourcing hub for manufacturing, the fiscal laws and procedures should be simplified and made in tune with international law, it said.
Assocham said the recent transfer pricing legislations had created apprehensions among foreign investors. It said the government should recognise that business conditions were dynamic and therefore a rigid and inflexible approach to such tax legislation would discourage investments in India.
"The straight-jacket formula under transfer pricing regulation with its irrational concepts such as arithmetic average, certification of price by separate agencies, rigid documentary requirements and draconian penalties will discourage transnational companies," it said.
Assocham sought two years' deferment on transfer pricing regulations in the case of exports, adding that the harsh provision in the present guidelines under the transfer pricing should be modified at least for export business.
