Strongly advocating the need to remove retrospective amendment, Mr Ajay Shriram, President, CII stated that 'at a time when the Indian economy is struggling to regain its growth momentum and investment sentiment is weak, frequent and retrospective changes in tax laws, which are ambiguous and open to wide interpretation, should be avoided to restore investor confidence.'
Elaborating further on the proposals to re-vitalise investor confidence, CII stressed on early implementation of GST for which there is need to ensure that the Constitution Amendment Bill does not have sectoral exemptions built into it. Similarly, this is not the right time to announce GAAR considering that our economy continues to be in the midst of a slowdown and green shoots of recovery are yet to become apparent.
Commenting on the introduction of GAAR, Mr Shriram said 'CII's initial position was that we don't need a GAAR in the proposed form as there are a number of 'grey areas' which need to be removed before its implementation. Its introduction in 2015 in its present form would exacerbate uncertainty and dissuade foreign investors for making India a 'gateway' for investment'.
During the meeting, it was stated that a fresh thinking on the direct tax code is required, which would make it simple and exemption free. A low tax framework for direct taxes should be evolved, going forward, without looking at DTC as the base.
Elaborating further on the proposals to facilitate growth and investor confidence, CII stressed on the need for fiscal discipline. CII strongly advocated exploring every non-tax revenue option for augmenting revenue while rationalizing non-productive expenditure to contain the fiscal deficit.
CII strongly advocated the promotion of manufacturing as one of the priorities to kick start the flagging economy. To boost investment in manufacturing sector, the threshold limit of investment allowance should be reduced to Rs. 50 crores which would encourage mid-sized companies to participate as well. The quantum of deduction should be enhanced to 25% of investment.
At the same time, allowing accelerated depreciation on plant and machinery for 3-5 years, correction of inverted duty structure, maintaining the peak rate of customs duty at 10% to promote indigenization, simplifying tax and regulatory compliance, creating a framework for settling tax disputes without going into litigation were some of the suggestions to revive manufacturing, according to CII.
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CII underpinned the importance of reviving consumption and investment demand to infuse vibrancy in the economy for which fast tracking project clearance assumes priority. CII has further sought reducing the threshold limit of CCI clearance from the current level of Rs.1000 crore to Rs. 500 crore to kick-start investment and move towards the virtuous cycle of growth.
Similarly, encouraging PSUs to use cash directly to build capacity, providing MAT relief to developers and units in SEZs and reintroduction of Indian Development Finance Corporation which would cater to the need of long term financing were some of the suggestions made by CII.
During the meeting, CII pointed out that financing investments could be a challenge, since financial savings are on the decline. To incentivize savings, there is a need to increase disposable incomes of households by raising the basic exemption limit and removing surcharges
Mr Shriram reiterated that 'A pro-growth budget which makes a bold statement on reforms would go a long way to effect a turnaround in sentiment and mark a return to growth. The economy is at an inflexion point and is awaiting remedial action. CII is looking for Credibility, Continuity and Clarity from the Budget.'
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