Review slabs, rates to widen tax net, suggests PHDCCI

New Delhi, Jan 26 | Updated: Jan 27 2005, 07:13am hrs
The government should re-arrange tax slabs and rates to encourage voluntary compliance by tax payers instead of resorting to schemes like the VDIS, according to the pre-Budget memorandum submitted to the finance minister by the PHD Chambers of Commerce and Industry (PHDCCI). The government needs to incorporate measures so that further creation of black money is stopped as large amounts is blocked in physical assets.

The chamber has also pointed out that the corporate tax for resident companies which is 35% works out to 36.6% effectively after taking into account the 2.5% surcharge and education cess of 2%. The chamber suggests that the corporate tax inclusive of surchrage and cess should be lowered down to 30% for domestic companies and ultimately should be brought down to 25% in the next two-three years for better voluntary compliance.

As far as minimum alternative tax (MAT) is concerned, companies which are distributing dividend but are utilising their resources and savings for growth and corresponding contribution to GDP, employment, indirect taxes etc. should not be subject to the levy of minimum alternative tax.

The chamber suggests that sick units under the purview of the Board for Industrial and Financial Reconstruction (BIFR) should be exempted from capital gainsatax on sale of land, real estate, in order to effectively help their cash flows. A tax cut on such capital gains will hinder the recovery process of sick units.

The government should consider extending the tax holiday to businesses which use agro-inputs produced by farmers such as fresh milk, food grains, cereals and plantation (tea, coffee), the chamber suggests. The government had planned to amend section 80 1B of the income tax Act, to allow deduction of 100% of profits for 5 years and 30% of profits for next five years for new agro-processing industries set up to process, preserve and package fruits and vegetables.