Industrialists demand drastic cut in indirect taxes

Industrialists want Union Finance Minister Yaswant Sinha to rationalise the unduly high indirect taxes in the 2002-2003 Budget to generate demand in the country's sagging economy.

Speaking at a round-table discussion on Budget expectations organised by CNBC India in Mumbai last night, chairman of Godrej Industries, Adi Godrej, said there was deceleration in demand for consumer goods and excessive indirect taxation was hurting it further.

He said the 2002-2003 Budget should remove all surcharges on excise duties and bring down the effective excise duty rate to 16 per cent.

Grasim Industries' chief financial officer, D D Rathi, pointed out that 60 per cent of the cost of cement consists of taxes right from mining to production.

He said the forthcoming Union Budget should plan a greater amount of spending on infrastructure as it had a huge multiplier effect and claimed every one rupee spent on cement gets Rs 7.5 back into the economy.

Chairman of Asian Paints, Ashwin Dani, also pointed to the fall in consumers' purchasing power and cited the example of a slump in demand in the housing industry.

High taxation is preventing producers of consumer goods from further penetrating markets, he said and sought reduction in excise duty from 35-40 per cent to 18-20 per cent.

Godrej also said the finance minister needs to coordinate with the state governments while rationalising the indirect tax structure.

He said there should not be a situation where states impost additional taxes to raise more resources even as the central government tries to reduce the tax burden.

Godrej also called for the abolition of minimum alternate tax and dividend tax.

Wochkardt chairman Habil Khorakiwala also supported Godrej's demand saying that there was no place for a levy like mat.

Godrej said the finance minister should make some announcements on labour law reforms in the Budget to generate a 'feel-good' factor.

Federation of Indian Chambers of Commerce and Industry president, R S Lodha, did not agree with Godrej's suggestion that customs duties should be cut across the board to stimulate demand and said that customs duty protection should be relative to the competitiveness of a given industry.

Airfreight Ltd chairman Cyrus Guzdar felt there was a danger of reforms getting hit with demands for protectionism even after over 10 years of liberalisation.

UNI

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