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IT firms for extension of tech park scheme, others add to wish list

IT firms for extension of tech park scheme, others add to wish list
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First Published: Wed, Feb 28 2007. 03 28 AM IST
Updated: Wed, Feb 28 2007. 03 28 AM IST
The Indian software services sector is hoping the 2007-08 Budget will give indications that the government will continue the Software Technology Parks of India (STPI) scheme, beyond its expiry date of 2009.
Industry body Nasscom wants the government to encourage employable talent in the sector, and reduce taxes.
“The quality of engineers in India is pathetic,” said Ganesh Natrajan, managing director of Zensar Technologies Ltd. “The government should bring in some policies to do something about education,” he said.
Removing service tax and reducing customs duty on software are also on the Budget wish list. “IT and related services should be removed from the service tax net,” said Sunil Manglore, CEO of Datacraft India Ltd., the Indian arm of Datacraft Asia Ltd.
Cellular operators
Cellular phone operators want the government to smoothen revenue-share licence fee to 6%. They also want the Centre to do away with a multitude of taxes and charges and levy a single rate on the sector, T. V. Ramachandran, director general of Cellular Operators Association of India, said. “We are getting positive feelers from the corridors of power,” he said about the sector’s demand for softer licence fees.
A phone firm had to shell out anywhere between 6% and 10% of it annual revenue as licence fees, depending on the service circle. The average levy across the country was 9%.
The Indian drug industry wants the government to extend the 150% tax deduction offered for research and development by 8-10 years to give a fillip to domestic R&D.
The ambit of R&D activities eligible for the tax break—due for expiry in March—should be widened to include international clinical trials conducted in India, Ranjit Shahani, president, Organisation of Pharmaceutical Producers of India (OPPI), said.
The Indian Drug Manufacturers Association (IDMA), which represents more than 600 drug makers, said expenses incurred due to filing overseas regulatory approvals should also be considered for tax relief under R&D.
Other demands include lowering excise duties on allopathic and ayurvedic drugs to 8% from 16% and raising tax abatement for maximum retail price to 45-52% from 40% now.
IDMA has also called for a complete excise duty exemption on life-saving drugs.
“I would like to see the country spending more on health care, which will indirectly help the drug companies, and also promote R&D,” A.K. Jain, executive director of Ipca Laboratories Ltd said.
Indian companies typically spend 4-9% of their revenue on R&D compared to about 15% by global firms, he said.
Import duties need to be cut to 5% from 12.5% to make Indian firms globally competitive, OPPI said. “Fringe benefit tax especially hurts pharma firms because of the high marketing costs. Are promotional activities fringe benefits?” B.K. Sharma, ED, Unichem Laboratories Ltd, asked. “We need clarity on what constitutes fringe benefits.”
The jewellery industry has sought the implementation of presumptive tax as a clear cut method of taxation and a reduction in duty on polished diamonds to give India a boost as a diamond trading hub, industry watchers said.
“One of the major demands is the implementation of the presumptive taxation regime,” said Neelesh Hundekari, principal, AT Kearney.
Jewellery manufacturers are now taxed on their income. Introduction of a presumptive tax would mean that companies would be taxed on their revenue.
“One of the concerns the trade and revenue departments have always had is the valuation assessment of profit,” Ashish Goenka, MD of Suashish Diamonds Ltd, said. The presumptive tax would be more clear cut, he added.
Diamond jewellery manufacturers are also seeking to reduce or completely do away with the 5% duty on polished stones.
The country’s cement makers want the government to reduce its dependency on thermal power and release coal, a key raw material for cement. Cement firms have been facing a supply crunch of coal. Alternate sources of power are available to coal, said Manoj Gaur, president of Indian Cement Manufacturers Association in a statement.
The industry lobby also wants the royalty on limestone, another key raw material, to be made on par with iron ore, the steel industry’s primary raw material.The royalty on limestone constituted 1.86% of the average selling price of cement, while that on iron ore is 0.07% of the average selling price of finished steel, it said.
The industry body said taxes and levies constitute about 70% of the ex-factory price of cement, one of the highest in the Asia-Pacific region.
Gaur said the Indian cement industry would be investing Rs52,000 crore by 2011-12 and that would require assured supply of raw materials.
Indian air carriers want the government to retain aircraft lease payments outside the tax net, cut aviation fuel tariff and provide tax relief to immigrant pilots, industry players said.
Withdrawal of the exemption on withholding tax on lease rentals in the forthcoming Budget would increase the cost of local airlines as leasing firms typically passed on the liability to lessees, they said.
In fact, the government needed to cut the tax on aviation turbine fuel, which was much higher than international levels, G.R. Gopinath, MD of Deccan Aviation Ltd, said.
“Any cut in taxes can be passed on to the customer making air travel even more affordable,” he added.
The withholding tax, which would require airlines to withhold the tax liability from leasing companies and pay it over to the government, has now been kept in abeyance for several years.
The hotel industry wants to be given tax breaks and treated as an infrastructure sector to boost investment and growth, analysts and hoteliers said.
Infrastructure status will make it easier for hotels to raise funds and boost their profits, analyst Viraj Nadkarni of Finquest Securities Pvt. Ltd. said. “A lot of investment in the sector is coming up and the government does not want to dampen that sentiment.”
Given the rapid growth in business and leisure travel, India needed to step up room availability, Chender Baljee, chairman and managing director Royal Orchid Hotels Ltd, said. “About 60,000 rooms are needed in the next three years... To give that kind of boost, you need to look at a 10-year plan in which to give incentives,” he said.
The logistics sector wants the Budget to lay a stronger emphasis on infrastructure development and usher in a more simplified taxation regime, industry players said.
“Infrastructure should be given the topmost priority,” Prem Kishan Gupta, vice chairman and MD of Gateway Distriparks Ltd, said. The Budget must announce incentives for cold chains that would help in the expansion of India’s retail sector, he added.
Amitabh Chakraborty, president for equities at Religare Securities Ltd, said India should move to a single goods and service tax. Such a system would encourage companies to manufacture at fewer locations and use warehousing and transport facilities freely to serve customers, he said.
State-level entry taxes and the associated cost of fuel, waiting time at check points led to a loss of about Rs1,000 crore a year, said S.K. Hazra, MD of Aegis Logistics Ltd.
Indian textiles and clothing makers want taxes across categories to be cut and the technology upgradation fund (TUF) extended till 2012 to boost investment in the sector.
It wants the import duty on processing equipment and automated sewing machines abolished from 5% as these were not produced in India, and duty on all other textile machinery to be pegged at 5%.
“There are no Indian manufacturers for sewing machines, so there is no one to protect,” Rajendra Hinduja, executive director at apparel maker Gokaldas Exports Ltd, said.
The effective duty on such machines works out to 28% and not 5% if one accounts for countervailing duties and others, he said.
Indian tyre makers want the duty on rubber imports to be cut to do away with an inverted duty structure under which rubber attracts a higher duty than the finished good. Rubber makes up about 60% of the cost of a tyre. They want the 20% duty on rubber imports to fall to 7.5% or 10% to prevent dumping of tyres, the Automotive Tyre Manufacturers Association said in a statement. Tyres now carry an import duty of 12.5%.
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First Published: Wed, Feb 28 2007. 03 28 AM IST
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