Budget needs to focus on growth: Adi Godrej

Speaking at the consultation meeting called by P Chidambaram, Union Finance Minister on pre-Budget recommendations, Adi Godrej, president, CII, said that the objective of the Union Budget should be to revive growth, given the current economic situation.

According to a CII statement, Godrej mentioned that in the given economic condition, it would have been natural to seek a stimulus including reductions in excise and service tax rates.

In the context of the poor fiscal condition, however, that would be an unreasonable request and therefore, Confederation of Indian Industry suggested that the present rates of excise and service tax rates be maintained.

CII has also suggested that the peak customs duty be maintained at 10 percent since there are huge excess capacity globally, which could pose a threat through cheap imports into India, in the event of a reduction in customs duties.

Looking at the external conditions, CII has also appealed to the Finance Minister to consider allowing the 2 percent interest rate subvention for all sectors of exports, as compared to the current policy of allowing this only for select segments of industry.

Alluding to the fact that investment demand has dried up significantly, Mr Godrej has suggested that the government allows 25 per cent accelerated depreciation for investments in plant and machinery for a pre-defined period of 3-5 years.

This should help prepone investments without affecting revenues.

Similarly, a 250 per cent weighted tax deduction on expenditure incurred by companies on 'going green could be considered since this would induce investments, which otherwise would not be in the plans'.

Flagging the problems owing to widening fiscal deficit, CII has pointed out that unutilized assets of PSEs could be monetized and the revenues so generated can be used for investment in infrastructure.

CII has also strongly recommended that the recommendations of the Kelkar Committee be accepted by the Government and be implemented.

Further fiscal consolidation can be achieved by way of disinvestment to the tune of Rs 50,000 crore (Rs 500 billion), resolving a part of the Rs 4,00,000 crore (Rs 4,000 billion) stuck in taxation disputes and rationalizing subsidies, the CII release said.

CII has recommended gradual move towards removal of diesel subsidy over the next three years.

Cutting fertiliser subsidies also merits equal if not more attention.

In this respect, CII has recommended putting a limited quantitative restriction on purchase of subsidised fertiliser, this would entail the exchequer savings of approximately 10 percent (translates to almost Rs 10,000 crore or Rs 100 billion).

Further, CII has recommended the consolidation of overlapping parts of central schemes, which could yield revenues of upto Rs 10,000 crore.

CII has also reiterated that the Government should not look at taxing transactions in Commodity exchanges (Commodities Transaction Tax).

The Companies Bill is introducing the new provision that 2 per cent of PAT would have to be mandatorily spent on CSR.

Such a move is without precedent. Provision should be made for a weighted deduction of 150% of the expenses incurred by companies towards activities classified as CSR under the Companies Bill, as per the CII release.

Making a mention of a specific, Mr Godrej has pointed out that attention needs to be given to excise valuations where goods are sold below cost.

There are a number of genuine reasons where manufactures sell their goods at less than the cost for a specific period.

Suitable guidelines to exclude such cases need to be issued to avoid issuance of queries to large number of manufacturers by the excise authorities.

The CII President made a special mention of the fact that industry wants early implementation of GST and expects early resolution of issues related to the amendment of the Constitutional Amendment Bill which was introduced in the Parliament on 22 March 2011.

Accordingly, industry is looking forward to an announcements of a fresh date of implementation of GST.

Responding to the rumours of new taxes like 'inheritance tax', etc, Godrej has strongly advised against any such new taxes, which would dampen sentiments and not contribute significantly to the exchequer.

Image: Adi Godrej | Photograph: Rediff Archives