Industry chamber Assocham on Wednesday urged the government to reduce GST rate by 25 per cent across the board for the next six months with a view to boost investment and demand.
The industry body said that it is not the time to worry about widening fiscal deficit as in the current circumstances, deficit financing will not be in an issue.
"The first radical suggestion is that GST rate should be cut across all slabs by 25 per cent for the next six months in order to kick start the economy.
"It will mean an additional deficit of Rs 1.20 lakh crore, which obviously will increase fiscal deficit.....but in the circumstances of today, deficit financing will not be an issue," Assocham President Niranjan Hiranandani told reporters here.
He said that the move will encourage more businesses to pay tax, which will lead to generate more revenue due to expansion of the tax base.
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Such steps would help in achieving the target of USD 5 trillion GDP, he added.
"We need to solve the unemployment problem of India along with GDP growth. GDP growth alone is not enough for India. It has to be inclusive. Our suggestions are in line with this fact," he said.
Hiranandani also said that fuel should be brought under the ambit of GST and the option for availing input tax credit should be available to all the businesses, so that the credit chain does not get blocked.
He also suggested that most NBFCs are under a huge liquidity crunch, which has a direct impact on the economic activities, resulting in a financial pressure and slowing down of businesses.
The finance minister, with support from the RBI, needs to create a professional panel to address the situation on a war footing, the president said.
"Allow large non-banks to convert into banks. They will be able to serve their target clientele (MSMEs, informal sector etc) and promote nationalist banks with initial ownership of even 100 per cent to be reduced gradually to 26 per cent over a given period of time," he said.
On direct taxes, he suggested the government that the maximum cap of tax rates for the salaried individual should be kept at 25 per cent, keeping in mind the reduced corporate tax rates.
"All allowances and deductions for example conveyance etc should be indexed as per cost of inflation notified for capital gains, since the date of their introduction".
On the agriculture sector, he said that corporates should be allowed to do contract farming and to infuse high-end technology in farming, there is a need to create technology up-gradation fund for agriculture to provide capital subsidy.
On telecom sector, the Assocham president said that it is absolutely imperative to address the AGR issue to ensure the continuity of business, and investment in the sector.
"Telecom Sector has been going through financial stress in the last 3 years. The recent AGR judgment has further aggravated the stress and lead to an unprecedented financial crisis," Hiranandani said.
Similarly for the real estate sector, he recommended that the banks and financial institutions should be given discretion to one time restructuring and/or roll over of their existing loans to the sector on the lines of loans to other segments.
When asked, whether the ongoing protests will dent investments, he said "I do not agree" as investors are looking at India in a positive manner.
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