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"25% Accelerated Depreciation For Investment In Plant, Machinery"

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The framing of Union Budget should be seen in the context of challenges coming from domestic and external factors. We have little control on external constraints, such as global weakness etc and so the Budget will have to focus on domestic factors.

The Union Budget 2013-14 thus has to be growth oriented and take care of fiscal balance by keeping deficit under check. It should also help Indian business and industry to improve its competiveness vis-à-vis the overseas firms.

Manufacturing Sector
Manufacturing sector has been going through a period of continuous slowdown for quite some time as the latest GDP projections show. To promote investment manufacturing could be provided an incentive like allowing 25 per cent accelerated depreciation for investment in plant and machinery for pre-determined period of 3-5 years to pre-pone investment.

It is also important that Budget provides a road-map for long pending issues like GST, DTC, etc. GST is particularly important as I believe that it can be a “game changer” and we have seen a forward movement though some contentious issues are yet to be resolved.

Investment in infrastructure is another key requirement for manufacturing competiveness and growth. It is in this regard that one will like to see further thrust on instruments for raising resources for the infrastructure sector and the development of a healthy Corporate Bond market.

Fiscal Balance and Revenue Generation
Maintaining fiscal balance is essential for long term growth as also to ensure that corporate sector is able to get funds at reasonable rates of interest. For achieving this we need to manage expenditure better. Besides avoiding duplication of schemes, it is also essential to ensure that subsidies reach the real beneficiaries for example through greater usage of ‘Aadhar’ and Direct Cash Transfers. This will help to reduce leakages and thereby contain the subsidies. Similarly, subsidies in petroleum products should be reduced by gradually moving towards market pricing in Diesel.

There is also a need to generate revenues from measures such as disinvestment, unlocking /collecting monies locked up in tax litigation through fast track tribunals/courts. It is also imperative that Government looks at getting income from natural resources through royalty/auction and with transparent guidelines.

Change in Tax Rates
Given the slowdown in manufacturing, it is necessary that no additional burden is put on Corporate Sector in both direct and indirect taxes. It is imperative that revenue generation has to come from finding new sources rather than imposing more taxes on existing tax payers. Increasing tax rates for the ‘rich’ is counter-productive because a large proportion of the personal income tax collection is already coming from them.

In India, only a small proportion of total population pay taxes and therefore we should widen the tax base and bring sectors that are presently outside the tax net into the tax system. For example, the highest levels of agriculture can be taxed at a moderate rate.

In view of the country’s modest level of overall development, we have to create more wealth rather than tax the existing.  For the same reason and some others, it would be inappropriate to impose inheritance tax or tax dividends once again in the hands of the recipients at higher income slabs.

In the past, high tax regime encouraged tax evasion and the development of a parallel economy but ever since tax rates have been brought down to moderate levels, revenues have grown.

(Harsh Pati Singhania, Director-JK Organisation & President, ICC (India)

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