What does the auto-components industry want the FM to announce? What are the expectations of companies engaged in renewable energy? Over the past 10 days or so, we have been flooded with Budget wishlists from across industrial associations and companies.
We now present a compilation of expectations from companies that have not been covered in the past, in our endeavour to provide a platform for every sector of industry.
Need for Transferable Tax Credit-mechanism
• Need to attract FDI in wind energy sector to stimulate growth in the sector, and in order to do that should prepare a Transferable Tax Credit-mechanism, linked to actual performance as an option in lieu of Accelerated Depreciation.
Tulsi Tanti, CMD, Suzlon Energy
• There is a strong case for raising the ECB limits for the infrastructure sector in the ideal scenario, and if not feasible at that level - then for the power sector, and as a very minimum for the renewables industry.
• On SEZs, we recommend that sales of services and products between different companies within the same SEZ or between different SEZs should also be treated as exports and be eligible for Income Tax benefits in the cases when the end-product is exported.
Accelerated depreciation benefit for sunshine industry
• To provide greater stimulus to economic growth, the surcharge should be waived and the corporate tax should be lowered by 5% at least.
Deepak Puri, CMD, Moser Baer
• There should be reduction in customs duty on raw materials, intermediates and components wherever possible and reduction in excise rate from 16% to 14%.
• The Finance Minister should reintroduce investment allowance to allow 25% deduction on investment in plant and machinery.
• 100% depreciation on energy saving and water conservation devices would be a welcome step in ensuring environmental protection.
• There should be an accelerated depreciation benefit of 120% to Solar installations.
• As a company which invests heavily into R&D, we would also call for extension of 150% weighted R&D deduction to all sectors.
Duty concessions for vehicles using alternate fuels
• Steps to decrease interest rates as this is hurting the auto sales growth particularly the two-wheeler growth.
Nirmal K Minda, MD, Minda Industries
• Reduction in import duties of raw materials and review of duty structure to provide a level playing field for the Indian Auto Component Manufacturers vis a vis the manufacturers from FTA countries.
• Provide fiscal incentives like extension of duty drawbacks for the exports from auto component sector.
• Duty Concessions should be extended to vehicles using alternate fuels like CNG and LPG which are not only cheaper but are also cleaner.
Infrastructure development to be key for India’s growth
Union Budget 2008 should stimulate investment in infrastructure, inclusive for all stakeholders. Cement sector is currently heavily taxed. Current Excise Duty of 12% should be brought down to 6%. Customs duty on coal import needs to be cut down by half. Taxes on the bulk diesel buying and furnace oil used by the cement industry also need to be rationalized. Government should scale up the investments in the power sector to ensure energy security for all and particularly for the cement industry.
Vinod Juneja, Dy MD, Binani Group
With firm competition from Southeast Asia, China, and the West Asia, both the industry and the government must work hand-in-hand to tackle the issue. Finance Minister should re-visit the policy on zero import duty on cement.
Complete waiver of customs on products not made in India
The Indian Tyre Industry produced 736 lakh units of tyres (11 lakh tonnes) garnering Rs. 19,000 crores in FY 07. Off the road (OTR) tyres (customized tyres which fetch a higher margin compared to other tyres) category is growing at a fast pace. CEAT Ltd. is increasing its OTR capacity at its Nasik plant from 60,000 to 1,00,000 tyres by end 2008.
K J Rao, chief financial officer, CEAT Ltd
• Import of natural rubber to be permitted as there is gap between demand and supply in the country.
• Complete waiver of customs duty on products not manufactured in India such as butyl, chlorobutyl and styrene butadiene.
• To abolish the Regional Free Trade Agreements with fully developed countries such as China, Korea.
• We expect the custom duty tariff to continue to be rationalized and be lower by 2.5% across the board.
• Excise duty structure to be realigned and lowering of duty on certain industries such as textile and agri based industry and radial tyres to promote new technology.
• CST to be reduced to 2% from the current level of 3%.
India needs to evolve as a leader in intellectual capital
The offshore services sector has been at the forefront of India’s growth into a global force, but is besieged today by unprecedented pressures. Scalability is limited by skilled labor supply, while rising costs and appreciating rupee are creating margin pressure.
Subinder Khurana, president, MarketRX India (a Cognizant firm)
Studies show that that only 25% of technical graduates and 10-15% of general college graduates were suitable for employment in the offshore IT and BPO industry.
The problem is even more acute in Knowledge Services, which requires high end skills in technology.
• More investments in higher education to professionally train students for employability.
• Barring a few premier league institutions, most universities in India are floundering in a state of neglect. It is critical that the government step-up investments in higher education and thereby enable many high-end jobs if India is to achieve its destiny as a global intellectual powerhouse.
Reduce tax burden on both individuals and corporates
The economy being fundamentally strong we should be optimistic about our march towards the 10% GDP growth rate.
Pramoda Karkal, VP & MD, building efficiency, Johnson Controls India
• The budget should throw further clarity on Transfer Pricing regulations as it is difficult to find comparable companies for analysis as required by the prescribed methods for arriving at arms length pricing; thereby resulting in unjust adjustments to returned income.
• Union Budget ‘08 should look at a further reduction in basic custom duties by at least 4-5%.
• Clear the reduction in central sales tax rate from current 3% to 2% as promised.
• Reduction in basic excise duty from current 16% to 12% that will result in the reduction lowering cost of local manufacturing and further fuel the economic growth.
• The budget should withdraw the Fringe Benefit Tax as it is unnecessarily adding to the cost of operations in India.
• With direct tax collections having witnessed a whopping 40% growth and all set to cross Rs 3,00,000-crore mark this fiscal, the Finance Minister can reduce the tax burden, both on individuals and corporate houses.
Withdraw MAT on export income
On the fiscal front the primary issue for the upcoming budget remains that of subsidies — both direct and indirect. The manner in which they are addressed will be crucial.
Sumeet Nadkar, chief financial officer, Kale Consultants
• Minimum alternate tax, which was extended on export income last year, should be withdrawn.
• The tax sops for IT-ITES under 10A/10B should be extended beyond 2009.
• As regards tax incentives this year we expect lower rates coupled with lesser deductions.
• Levy of service tax on leasing commercial space have a significant impact on the cost structure of IT companies with Budget 2008, we hope for some kind of “VAT ability” even for companies with export income.
• A better utilisation of allocated e-governance funds.
Sops for tomorrow’s ”Infys”
The next generation of Indian IT, or IT 2.0, will originate from small, innovative and entrepreneurial companies. If we do not provide the benefit of an STPI like scheme to these budding companies, how will they become Infosys’ s of tomorrow. Taking sops away at this nascent stage will hurt entrepreneurs in the next decade.
Praveen Kankariya, CEO, impetus Technologies
• Continuation of the STPI scheme to help budding IT companies.
• Relaxation in corporate taxes since the IT industry is paying taxes way beyond most industries, indirectly.
I look forward to 100% FDI in retail
R Subramanian, MD, Subhiksha Trading Services
15 years ago, the approaching budget would send us into a tizzy, making us fervently hope that the tax hikes and levies would not be crippling. Today, budgets are like a breeze.
Petrol price hikes happen as and when and if at all and not with the budget. The railway budget actually reduces prices.
As a retailer one’s wish list would be in two parts — one for the consumer who keeps us going and one for the industry itself. From the consumer side, the key issue is that the Indian consumer has made the India story happen — it is not so much an infra-led or export-led growth that India is seeing as much as it is a consumption-led growth. With signs of stress on the global economy, it is important that the confidence of the consumer is not dented.
So key takeaways are no shocks and some sops and some things to reduce the burden that the consumer feels - higher deductions for home loan interest and investments in stocks and higher exemption limit on base incomes for people living in metros to offset higher costs of living would be good signals that the Government is concerned about the well being of the consumer
As a retailer we would wish for 100% FDI, though we know that will not happen. What we would like to happen is faster movement on CST abolition and a move to the Goods and Service Tax regime faster. Tax breaks for employment generation by retail in the unskilled workforce category would be in line with policy of inclusive growth. Industry status would be a mood elevator after all the issues of the last two years which have worried the retail industry so far.
Allow ECB in excess of $20 million for rupee funding of core projects
The key initiatives should be to reduce overall tax burden to stimulate manufacturing. All indirect taxes such as excise, sales tax, octroi and entry tax should be replaced by a single tax.
Deepak Pahwa, MD, Bry Air
Tax related anomalies, which encourage imports at the cost of domestic manufacturing should be removed, to create a level playing field. Encourage R&D through initiatives such as providing tax benefits, setting up an industry focused R&D centre.
External commercial borrowings (ECB) in excess of the ceiling of $20 million should be allowed for funding rupee expenditure on infrastructure projects and participation of private sector in infrastructure should be initiated.
Make chocolates sweeter, cut excise from 16% to 8%
• Removal of service tax on commercial rentals
• Reduction in customs duty on imported kitchen equipment with a focus on encouraging tourism. While the basic custom duty rate has come down over the years, with inclusion of CVD, education cess and additional import duty, the total duty payable on imports is more than 30% of the import value. The additional import duty of 4% should be abolished and CDV should be reduced over the years.
• As all sates are now under the VAT regime, there should be abolition of Central Sales Tax (CST) and inter-state sales should be Vatable. This would encourage sourcing of products from where they are most cost effective and the savings can be passed to the end consumer.
Samir Kuckreja, CEO & MD, Nirula’s
• Reduction of excise duty on chocolate products from the current 16% to 8%
• Removal of excise on cakes and confectionary items of 8% as these are being purchased by the common man and the middle class and not only by the rich alone
• Govt. aid and investment in retail training, like ITI and vocational training institutes created to cater to the need of electrical and hardware skills
• The government should expedite the much awaited Labour Laws reforms. It should allow for temporary hiring and retrenchment should be made easier. Part timing or temping should be legalized
• Employment age can be brought down to 16 years for part timers as school going boys and girls can also find part time employment.
• Labour intensive units like hospitality (in other words high employment generators) can be given tax relief may be in the form of subsidy or rebates.