6-point strategy for achieving 10% growth: Assocham

6-point strategy for achieving 10% growth: Assocham
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First Published: Wed, Nov 21 2007. 04 19 PM IST
Updated: Wed, Nov 21 2007. 04 19 PM IST
New Delhi: To achieve a high and sustained growth rate, Assocham has proposed making India a common economic market by initiating the process of implementing GST, reducing excise duty rates, rationalizing taxes on key infrastructure, encouraging indigenous R&D, corporatizing agriculture and promoting India as the global headquarters of business enterprises.
At a meeting with officials of the Finance Ministry chaired by PV Bhide, revenue secretary, a case was made to implement GST at the earliest, so that the cascading effect of taxes is removed form indigenous manufacturing and services cost, transaction cost is reduced and trade and industry can grow faster by taking advantage of economies of scale and an efficient supply chain.
The process of replacing the existing complex indirect tax system by GST should be initiated in the forthcoming Union Budget by taking initial steps towards GST. It has suggested that CST rate should be reduced from 3 to 2% as a step towards creating Indian common market, excise and Service tax be integrated into Central GST during 08-09 and sugar and textiles be brought from special duty to VAT regime.
Observations
* Manufactured goods are still quite expensive and therefore, reduction in excise duty rate to 12% will make them affordable to larger population while boosting their demand and accelerating the manufacturing sector’s growth with minimum impact on revenue
* Such reduction will align tax rates under excise and service tax, facilitating their integration under Central GST
* Excise duty rate on automobiles should be moderated by removing special excise duty on this sector
* Upgrading infrastructure significantly in order to sustain economic growth, it was suggested that service tax and excise duty on inputs during the investment phase should be exempted from tax or refunded and that tax may be collected once projects are put to use and they start earning revenue
Presently a large number of Indian companies are investing overseas for profitable growth and strategic advantage. Any dividend remittance by foreign companies will attract full tax even where such profit from which dividend is remitted has suffered tax in the host country. This has led to Indian companies setting up head offices abroad or parking funds overseas.
Many countries exempt such dividend where shareholding is substantial (20-40%). India should promote itself as headquarters of business enterprises and retain long-term capital by exempting dividend remitted by foreign subsidiaries or associates with 40% or more investment. Alternatively tax paid on profit from which dividend is declared, should be given credit.
Recommendations
* Create Agriculture Economic Zone on the lines of SEZ for making this concept a success, in order to achieve agriculture growth by at least 4% on sustainable basis
* Government to ensure adequate investments in pre and post harvest management, food processing, export promotion related activities, specific crop related activities and application of R&D to agricultural production
* In order to ensure that there is adequate quality produce, investment in irrigation, transport, rural electrification, telecom connectivity will be required apart from pre and post harvesting activities to help develop rural infrastructure and to provide employment to labourers engaged in agriculture
* For a strong research base and pool of intellectual properties, scientific research should be carried out in emerging sectors like bio-technology, nanotechnology, industrial deign, IT, telecom, food processing, medicine and engineering
* They should be given favourable tax treatment under direct and indirect taxes to encourage such activities and the double taxation of intellectual properties under service tax and VAT regime should be discontinued
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First Published: Wed, Nov 21 2007. 04 19 PM IST