‘Reviving long-term manufacturing growth a challenge’

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New Delhi | Published: January 7, 2015 12:58:35 AM

Finance minister Arun Jaitley told industry captains on Tuesday that reviving the manufacturing sector...

Finance minister Arun Jaitley (right) with chief economic adviser Arvind Subramanian during the pre-Budget discussion with industry and trade groups at North Block on Tuesday.Finance minister Arun Jaitley (right) with chief economic adviser Arvind Subramanian during the pre-Budget discussion with industry and trade groups at North Block on Tuesday.

Finance minister Arun Jaitley told industry captains on Tuesday that reviving the manufacturing sector, diversifying its base and preparing it for robust long-run expansion was one of the major challenges he was facing as he prepares the Budget for 2015-16.

Addressing industry chambers at a pre-budget consultation, the minister said infrastructure sectors such as coal, power and cement have been recording double digit growth in the last few months while growth in manufacturing was still patchy.

He assured the business heads that improving India’s ranking in ease of doing business was a priority.

Industry leaders urged Jaitley to take measures in the Budget that would enhance public spending on infrastructure as well as boost manufacturing and domestic consumption.

They urged the minister to lower the minimum alternate tax (MAT) rate from 18.5% to 10% and exempt developers and units in SEZs from this
levy charged on companies that do not pay the 30% corporate tax on their book profits due to tax breaks.

Ajay S Shriram, president of industry chamber CII, said there was a need to raise the investment limit under section 80C of the Income Tax Act and link income tax exemption limit to inflation. This would increase disposable incomes of households and revive consumption and savings.

He also pitched for removing the surcharge on income tax.
“In the prevailing scenario, major expenditure for building new capacities should come from the government or cash rich public sector companies, especially in infrastructure sectors,” he said in a statement after the meeting.

“Investment allowance should be extended to the infrastructure sector to give a fillip to investment activity without significantly affecting government finances. We asked for tax incentives. Restore tax benefits for individuals for investing in infrastructure bonds,” Shriram said.

Ficci president Jyotsna Suri urged the minister to provide “a genuine non-adversarial and conducive tax environment” for the industry and economy to flourish.

“I requested for rationalisation of the tax regime. There is a revenue target given to tax officers and because they have to attain that, they often make irrational tax demands. They should be judged on their performance and not on achievement of targets,” she said.
Industry executives also said the Reserve Bank of India (RBI) should cut key interest rates to boost demand and investment. They asked for
deferring the implementation of GAAR, from April 2016, by two years.

FIEO president Rafeeq Ahmed urged Jaitley to immediately withdraw MAT and dividend distribution tax on SEZ units and developers.

“This would go a long way in regaining trust and confidence of domestic and foreign investors,” said Ahmed.
FIEO also asked for restricting the higher 25% withholding tax on royalty and fee for technical services payable to non-residents only on parent-subsidiary transactions. In other cases, the rate should only be the 10% that was in force before it was raised in 2013.

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