We expect some 2nd-gen reforms in this Budget

Written by Neha Pal | Neha Pal | Updated: Mar 2 2012, 17:57pm hrs
Videocon Telecommunications (formerly Datacom Solutions) MD and Assocham president Rajkumar N Dhoot speaks to Neha Pal on the Union Budget, measures needed to boost investments in infrastructure and other reforms. Excerpts:

What are your expectations from the 2012-13 Union Budget as far as direct taxes are concerned

As for personal taxation, Assocham has suggested an increase in deduction of interest on housing loan from R1.5 lakh at present to R3 lakh and increase in the deduction on medical reimbursement from R15,000 to R50,000. However, we feel there may not be case for reduction in tax rates.

We have asked for a recast of the tax slabs which is in keeping with the Direct Taxes Code Bill before Parliament.

On corporate taxation, we have suggested increase in depreciation rate and a lower rate of tax on dividend from companies abroad.

As the Centres fiscal deficit is expected to exceed the target of 4.6% of the GDP for the current fiscal, how do you think fiscal consolidation can be achieved

The key is better financial management particularly through controls on subsidy. To reduce fiscal deficit for sustainable economic growth, the government should consider a five-pronged strategy. First, expand revenue base by taxing all services except those in the negative list. Second, selectively increase customs duty import of non-essential goods that are not inputs for Indian industry. Third, generate additional revenue by disinvestment in public sector units. Fourth, reduce food and fertiliser subsidy. And lastly, bring all the items under excise net, which are not exempted under the state value added tax to align with the Goods and Services Tax regime.

Your views on withdrawal of surcharges and cesses like education cess, road

We strongly recommend merger of all surcharges and cesses to simplify the tax regime. The government can allocate appropriate expenditure from the Budget for such expenses for which a cess was initially levied.

What measures do you expect to boost the infrastructure sector like road, power, ports and airports

The government could consider exempting all inputs and input services used in development and maintenance of these structures from tax. There could also be a n income tax holiday for specified infrastructure projects. We want policy liberalisation for setting up warehousing facilities at the ports for storage of petroleum products and other goods for re-exports and for domestic use.

The government should resolve policy issues for land use and environment clearances. The issue of delay in clearances must be addressed on priority basis. Financial institutions, particularly India Infrastructure Finance Company Limited and Life Insurance Corporation, should disburse more money for infrastructure. Generation of infrastructure funds through bonds must be encouraged.

Are you expecting the government to raise the service tax that was reduced as part of the stimulus package

Assocham is of the view that present rate of service tax of 10% should continue. The government should expand the tax base rather than rates.

As the fears of double dip in the global economy are surfacing and impacting domestic stock markets, do you expect the government to take steps to boost investor confidence

Yes. Fiscal stability, expeditious reforms like introduction of GST, economic

policy liberalisation, stability and certainty in tax regimes are some of the key initiatives investors expect. The Indian economy had fared reasonably well despite the global economic crisis. We expect some measures in this Budget to ensure continued investors confidence.

What other reform measures are you expecting from finance minister in the Budget

Assocham eagerly looks forward to second generation economic reforms. We expect some of these in this Budget. Apart from measurs to boost infrastructure financing we expect fiscal consolidation, widening of financial markets and early introduction of GST and encouragement of foreign direct investment through policy liberalisation.