Trade and industry chamber FICCI today asked the Government to abolish fringe benefit tax, reduce corporate, personal tax rates and raise FDI caps in the insurance sector to enable the economy sustain high economic growth.
In its pre-budget submission to the Government, FICCI suggested that the Government should open up the pension sector to mobilise additional resources for infrastructure development.
Demanding removal of the controversial FBT, the chamber in its 15-point fiscal agenda said the levy, if could not be abolished, should be rationalised to keep genuine business expenses especially those incurred on sales promotion outside its purview.
Corporate tax rate should be brought down to 25 per cent, which would be in line with the rates prevailing in other Asian countries, the chamber said.
FICCI demanded that excise duty be reduced from 16 per cent to 14 per cent next fiscal and ultimately to two per cent. The reduction in excise duty with consequential lower incidence of state and local taxes would result in a 3-5 per cent reduction in prices, the chamber said.
This in turn, would increase the demand for manufactured goods leading to higher industrial growth and reduced inflation.
The reduction in peak customs tariff in the Budget 2006-07 to 12.5 per cent from 15 per cent is a step towards aligning tariff rates with ASEAN countries, the chamber said, adding that the move should be calibrated with internal reforms.
FICCI demanded that all services be brought under the tax net, barring basic and public utilities. However, considering the need to promote exploration and production in the oil sector, the Government should exempt it from service tax, it added.
It also called for abolishing dividend distribution tax or slashing it to 7.5 per cent.
All industrial undertakings should be granted 100 per cent tax holiday benefit for ten consecutive years at any time during the last 15 years, after the commencement of commercial production, the chamber said.
It said the Government should continue tax incentives to promote and encourage employment generation, savings, investment and infrastructure development.
The Government should come out with a mechanism to refund Cenvat Credit accumulated through the countervailing duty and excise duty so that the cost of capital is confined to bare minimum.
The chamber also suggested that the Centre should set up an empowered committee to finalise the structure of the proposed Goods and Services tax.
In order to improve competitiveness of trade and industry, FICCI asked the Government to expeditiously phase out Central Sales Tax, imposed on inter-state trade of goods.
The CST was scheduled to be reduced to two per cent from the current four per cent this fiscal, but continued disagreement between the Centre and States over a compensation package for states has led to its postponement to the next fiscal.