The Confederation of Indian Industrys pre-budget memorandum released here yesterday has demanded abolition of double taxation on dividend income and lowering of corporate tax to 20 per cent.
The chamber, unlike other industry associations, has taken a soft posture on MAT. Ficci and Assocham have categorically demanded withdrawal of the newly introduced tax on the zero tax companies in their respective pre-budget memoranda.
It suggested tax exemptions to corporates be withdrawn in a phased manner and added MAT could at best be an interim measure in the process of broadening the tax base.
Incidentally, CII was the only industry association to have supported MAT after the introduction in the Union budget for 1996-97, but later criticised the measure, saying it was creating an adverse psychological impact.
The other demands of the chamber include a review of Foreign Exchange Regulation Act (Fera), introduction of value added tax (VAT), total abolition of surcharge on domestic companies and removal of special levy of two per cent on all imports.
The Fera has outlived its relevance in the changed environment and needs drastic overhaul, the memorandum says.The chamber has sought the raising of investment limit to at least Rs 3 crore from Rs 60 lakh while defining a small-scale industry unit.
The present limit is unrealistic as it does not encourage improvement in quality, technology, productivity and economies of scale, the memorandum says.
The chamber has demanded the removal of restrictions on inter-corporate loans and investments as it is irrelevant in the present environment.
The memorandum says companies should be allowed to issue non-voting shares, buy-back its own shares and permitted consolidation of accounts and adopt accounting standards according to international standards.
It says the popularity of debt instruments could be boosted by amending the Income Tax Act and the lock-in period of saving instruments should be done away with. It has stressed the need to move towards a VAT system, both at the Central and state level, to simplify indirect taxation. The move would check cascading effects and the government should try to find solutions to the problems that are likely to arise as a consequence of VAT.
The chamber has further said it would be prudent to equate the long-term and short-term capital gains for domestic companies at par with foreign institutional investors (FIIs).
Keeping in view the practical difficulties, the chamber has suggested the period for availing duty paid on all inputs under modvat scheme should be extended to one year so that the assessees do not lose their legitimate benefits.
Countervailing duty should be impo- sed on all items on which excise duty is applicable to indigenous industry to enable them to compete on par with foreign competitors, the memorandum says, adding the Indian industry is subject to other local levies like Central sales tax, sales tax and octroi.
The chamber has called for harmonisation of depreciation rates under the Companies Act and Income Tax Act. It has suggested that suitable scheme be introduced to carry backward business losses under the direct tax laws.
The scheme should provide business losses sustained in any year shall be adjusted against the profits of preceding two or three years. Also, the refund of tax out of the tax paid in the preceding years shall be granted and utilised for the purpose of business of the assessee, the CII memorandum says. A surcharge has been introduced in the case of domestic companies at the rate of 7.5 per cent on where the income exceeds Rs 75,000 and this imposes a tax burden, the chamber says. It said this should be abolished in the light of introduction of MAT.
The chamber has suggested the widening of tax base through the following measures: tax deduction at source (TDS) on royalty payment, TDS of payment to film actors, music directors, TDS on real estate transactions and taxation of agricultural income above Rs 5 lakh.
While infrastructure projects in power, telecom and railways could borrow in foreign currency upto 35 per cent of their project cost under the external commercial borrowings guidelines, the same facility is not available for investment in ports.
