Finance minister P. Chidambaram said on Thursday he intended to trim the long list of exemptions handed to various industries, and limit the tax breaks to research and development, and “vulnerable” sections of society such as senior citizens.
Addressing a Confederation of Indian Industry (CII) meet, Chidambaram said the only way to ensure an exemption-free tax regime was to keep examining various exemptions and “snipping away” at them.
In fiscal 2005-06, the government lost more than Rs2 lakh crore in revenues—56% of total tax collected—due to breaks. In fiscal 2006-07, the Centre hopes the figure would come down to 50.27%, partly due to its stated policy of examining and removing sops if possible.
“In the long term, we are for reconciling the number of taxes and few exemptions,” a spokesperson for CII told Mint. “I don’t think anybody would have any problems with the exemptions that the finance minister is proposing.”
Chidambaram said the Budget 2007-08 was an exercise in addressing supply-side concerns by focusing on availability of credit, fertilizer, electricity and water for the farming.
About the government’s focus on infrstructure, he said that apart from providing for increases in investments in irrigation, water bodies and equity investments in public sector enterprises, he has set aside Rs7,000 crore for infrastructure projects identified by the Planning Commission.
The government is also proposing a three-way agreement between the Centre, state governments and private parties to increase the availability of skilled industrial personnel. The initiative will cover 1,396 industrial training institutes. The Central government will provide Rs2.5 crore for each institute, with the state government retaining control over admissions and fee structures while the private sector will manage the institutes.
The government will also consider using the country’s foreign exchange reserves and providing a corpus of Rs100 crore to create a shelf of bankable projects, he said.