CII proposes faster divestment of PSUs, proceeds for infra building
5 min read 08 Dec 2021, 04:14 PM ISTThe industry body has suggested putting in place a conducive regulatory framework, transparent bidding process, flexible contract management and a credible dispute settlement procedure, in order to attract private investment in the National Monetisation Pipeline (NMP)
PremiumNEW DELHI : Industry lobby group CII has sought a faster divestment process of identified public sector units, including LIC of India, Bharat Petroleum Corporation Ltd, and Shipping Corporation of India, such that proceeds from their sales can be channelled towards building rural and urban infrastructure.
In its pre-Budget memorandum to the government, the industry body has suggested putting in place a conducive regulatory framework, transparent bidding process, flexible contract management and a credible dispute settlement procedure, in order to attract private investment in the National Monetisation Pipeline (NMP).
The government expects investments of ₹6 lakh crore in the ambitious plan, which has central government assets from multiple sectors up for private investors. For FY22, the government has set a ₹1.75 lakh crore target from divestments.
“Provide tax incentives for investment in Infrastructure Investment Trusts (InvITs) and bring them under the Insolvency and Bankrupcy code (IBC) as suggested by NITI Aayog," the industry body has said in a slew of suggestions for the government.
Among suggestions to increase investments, the lobby group said that more labour-intensive industries should be included under the Production Linked Incentive (PLI) scheme, which can aid job creation if incentives are linked to job creation on the firm’s payroll and production, instead of solely meeting production targets.
It also suggested that the interest subvention scheme available on low- cost housing should be extended to cover total housing cost of up to ₹35 lakh instead of ₹25 lakhs at present. Further, allocation under Pradhan Mantri Awas Yojana (PMAY) should be increased from ₹27,500 crore allocated in the Union Budget 2021-22.
For speedy dispute settlement in infrastructure projects, contracts up to a certain threshold value could have dispute resolution through binding conciliation and /or arbitration process, it said, adding that more Commercial Dispute Resolution Courts specialising in infrastructure sector-related disputes should be set up.
“Release all dues, whether outstanding payments or tax refunds to industry immediately. Further, release all outstanding payments to the state governments and other service providers," the body said.
The body further suggested that fiscal support should be provided to facilitate the creation of a ‘pandemic pool’ which would help mitigate the risk of financial losses of insurance companies due to future pandemics.
On promoting exports, the body suggested a sea-freight subsidy for a limited period of 6-7 months to exporters impacted by the high cost of containers. Shortage of containers and high costs have lead to higher freight charges and in turn escalated costs for industry and consumers.
“Allow SEZs/EoUs to avail the RoDTEP benefit for exports made from SEZ/EoU units. Provide infrastructure status to SEZs for accessing priority funding from banks at cost effective rates," it said in two related suggestions related to trade.
It also sought for expedite the clearance of the stuck Merchandise Export from India Scheme (MEIS) claims of previous years on a priority basis. At present over ₹40,000 crore worth of tax refunds under the MEIS are yet to be received as per Federation of Indian Export Organisations (FIEO).
Direct Tax proposals
On direct tax, the industry body has suggested extending concessional long term capital gains tax rate of 10% to resident investors in start-ups registered with the Department for Promotion of Industry and Internal Trade. It argued that while foreign investment into India is promoted, local investments in private companies are disincentivised, particularly, in start ups which are a high risk investment which generates employment and leads to innovation.
It added that monetary limit for deduction for new employees under Section 80JJAA, should be increased to ₹1 lakh instead of ₹25,000 now. Section 80JJAA allows deduction in respect of 30% of the salary of an additional employee hired during the year for a total period of three years. For this purpose, an additional employee is defined as one whose salary emoluments do not exceed Rs. 25,000 per month.
The increased limit will provide incentive for hiring technically qualified skilled employees who provide more value addition to the business, CII said.
It further suggested that income from mutual funds and business trusts may be put at par with dividend income by restricting maximum surcharge to 15%.
The industry body urged the government to re-think the denial of depreciation on goodwill acquired in taxable transaction.
“The seller is liable to pay capital gains tax on such transaction. The value of goodwill in such transaction indicates consideration paid by the acquirer to secure synergy, larger market share, better cashflow, forward or backward integration, competitive strength and higher efficiency in existing business, which leads to better profitability and higher tax," it said.
It added that the claim of depreciation on goodwill should not be denied for acquisition of business in non-tax neutral business reorganization like slump sale, exchange or itemized sale.
Indirect tax proposals
CII proposed that the government should consider creating a graded roadmap, strategized to shift duty slabs to a competitive level over three years, with exception to few products presently in the higher slabs, accompanied by policy actions to boost domestic manufacturing. Duty on imports of final products to be in standard slab, intermediates in the lower slab and inputs or raw materials to be at the lowest or nil slab.
“A phased manufacturing program together with production linked incentives (PLI) are good example, so that domestic manufacturers have time to adjust," the body said in its representation.
It added that review of final and intermediate products should be undertaken in consultation with the stakeholders to ensure that inputs which are not being manufactured in India can be imported at lower duty to increase export competitiveness of final products manufactured in India.
Further, RoDTEP rates should be reviewed and enhanced in commensurate with the actual embedded taxes and duties, and all export products should be covered under the scheme.
It suggested that export incentive may be transferred directly to the bank account of the exporters like duty drawback, instead of routing through issuance and transfer of credit scripts.
Further, provisions of customs law should be further simplified and the desired clarifications be issued for ease of compliance.
"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!
