The Confederation of Indian Industry (CII) has asked the finance ministry to provide tax breaks for the infrastructure sector, including exemption from minimum alternate tax (MAT), in the Budget for 2013-14 to revive growth momentum in the economy.
“Given that the 12th Plan (2012-13 to 2016-17) envisages an investment of $970 billion in infrastructure over the next five years, nearly half of which is to come from the private sector, urgent measures are required to make the sector viable and capable of attracting capital,” CII said in a pre-Budget memorandum to the ministry. Among various key measures suggested to provide fillip to investment in the sector, CII asked for exempting infrastructure companies from the payment of MAT.
Currently, infrastructure projects are entitled for a tax holiday under Section 80 IA for 10 consecutive years during the first 15/20 years of their operation. The levy of MAT during this period has greatly negated this tax benefit, the chamber said.
The chamber also asked for exempting holding companies from the payment of dividend distribution tax (DDT), if they invest the dividend received from subsidiary units in the infrastructure business. “This will help in pushing up the investment activities in the infrastructure sector,” said CII.
“Given the rapidly growing demand for housing from the low middle income population, it is critical to promote low cost housing. Currently, the government offers interest subvention of one per cent for low-cost housing loans up to Rs 15 lakh, provided the housing cost does not exceed Rs 25 lakh,” the memorandum noted.
CII recommended that the interest subvention scheme be extended to the total housing cost of up to Rs 35 lakh. This sector has one of the largest multiplier effects and therefore, an incentive for investments in low-cost housing would create demand in more than 200 industry sub-sectors, the memorandum said.
CII also wanted ‘integrated township development’ to be accorded infrastructure status.
CII also drew attention of the ministry to the need for the continuation of tax benefits for the power sector under Section 80 IA sunset clause, which entitles a company for tax benefits only if it starts generating power by the end of the current financial year.
With a view to attracting large investment in power generation, critical for growth, CII has made a case for extending the sunset clause under Section 80 IA till the end of the 12th Five-Year Plan period.
CII also recommended restoring a separate limit to Section 80 CCF outside Section 80 C, which would allow various government undertakings to issue tax-free bonds for making investments in railways, power, housing and highways.
In fact, private infrastructure companies should also be allowed to issue such tax-free bonds for various infrastructure activities, the chamber said.
