The Confederation of Indian Industry (CII) believes that the next financial year, 2007-08, will be another good year for the government in terms of growth in tax revenue.
It wants 75% of the incremental tax revenue to be used for development and even has a formula suggesting how this amount be allocated—35% for education; 35% for infrastructure; 20% for health care; and 10% for other developmental expenditure. The recommendation, from India’s most powerful industrial lobby, is indicative of the larger concerns of Indian companies.
CII believes the government needs to make a huge investment up-front to keep the economy growing. It wants gross capital formation in infrastructure to touch 11% by 2011-12.
Such demands also highlight a growing belief in both industry and the government that the fate of companies and entire industries is no longer dependent on a few provisions in the Budget.
“I would like the finance minister to do nothing as far as the auto-component industry is concerned. The industry has done well,” said Surinder Kapur, chairman, Sona Group, which is in the business of auto components.
That doesn’t mean the industry does not have any demands of Budget 2007.
Over the past three years, industry’s revenue and profits are up, but so is tax outgo. Various industry sectors now want the government to return the favour by rationalizing the tax regime.
“The next tax rate on companies should be between 25-30%,” said Rahul Bajaj, chairman, Bajaj Auto (it is now 33.67%).
“By net tax, I mean the impact after surcharges, cesses and exemptions; I am in fav-our of removing all surcharges and exemptions, barring the one on research anddevelopment.”
Industry would also like the Budget to reduce import tariffs on a clutch of products; although the peak rate of customs duty has been reduced to 12.5% from 1 March 2006, several products continue to attract high rates of duty, sometimes as high as 150%.
Most sectors still have specific demands. For instance, Arvind Parakh, the chief executive officer of corporate strategy and finance for Omaxe Ltd, a real-estate developer, wants an extension of the tax exemption for lower middle class and middle-class housing, and D.S. Kulkarni, chairman and managing director of an eponymous Pune-based developer, says interest rates on housing loans should be reduced.