In its post-Budget memorandum to be presented to the government next week, the chamber has said four per cent across-the-board special additional duty will create the problem of inverted duty structure. This, along with exemption for traders, will discourage domestic value addition and also affect competitiveness in the domestic industry.

A scientific exercise should be carried out by the Tariff Commission to determine the level at which customs duty rates could be kept with countervailing duty as special additional customs duty. This, the chamber feels, will help in integrating the Indian industry with the world economy and also give the right signals to the international community about its strength.

The eight per cent excise duty on branded products of dailyconsumption like tea, coffee, butter and cheese will prove to be counter-productive for the domestic industry. This duty is also discriminatory and there will be long-term negative repercussions due to its levy.

Withdrawal of this duty will help Indian industry in enhancing its competitive strength in the global market by establishing the Indian brands, Assocham has claimed.

Terming the restriction of modvat credit at 95 per cent as "a retrograde step and a backdoor way to raise revenue", the chamber has asked the government to pick up specific cases and address the issue in an appropriate manner. The amount of modvat credit availed has grown not because of the scheme's misuse, but due to liberalisation of the scheme and enlarged definition of `input'.

While the government has levied four per cent CVD to give a level-playing field to domestic industry, disallowance of five per cent modvat credit will go against the concept as it will increase the cost of production and have a negative impact on thebottomline of the companies, the chamber has pleaded.Demanding the withdrawal of service tax on chartered accountant, company secretaries and cost accountants introduced upon the recommendations of the tax reforms committee, Assocham has said the same panel had also recommended extension of modvat scheme to service tax.

"By now, the government has expanded the list of taxable services to 27, but has not extended the modvat scheme to these services. This Budget has not made any attempt to remove the inconsistency in the application of VAT principle," the chamber has lamented, comparing the situation to several countries which have adopted VAT, but have also included the service tax under VAT.

In the direct taxes, Assocham has said the proposed deletion of the `Not Ordinary Resident' category in the Income-Tax Act by amending Section 5 and 6 will have serious implications. Consequently, any individual staying in India for more than 180 days during a financial year will now be taxed in India on his or herworld income.

These will also include NRIs who come to India; have their past savings invested overseas that require a reasonable period to transfer them to India; those settled abroad who make large investments in the country and may stay back for more than 180 days and; foreign nationals working on long assignments in India. At present, they are taxed only on their Indian income until they become ordinary resident after regular stay of nine years in India.

The sudden withdrawal of NOR status will discourage NRI investment in India and scare foreign companies from investing in India or sending their technical staff to set up turnkey projects in high-tech and infrastructure areas, the chamber has said.