In the backdrop of a falling rupee and overall downward industry sentiment, Ficci pushed for initiation of new reforms to widen the direct tax net and a one-time amnesty scheme for Indians to bring back overseas money, among others.
These proposals would help the government in improving tax collections and bridging the fiscal deficit. We have received a positive response from the Finance Ministry and are hopeful that at least some of our suggestions will be incorporated into the Union Budget 2012-13, said Ficci president, Mr Harish Mariwala.
Mr Mariwala was speaking to media-persons after a pre-Budget meeting with the Finance Secretary, Mr R.S.Gujral, on Wednesday. Mr Mariwala said: To promote investments, the instrument of direct taxes should be used effectively. The tax administration should be made assessee-friendly to improve compliance, and the investment allowance restored to enthuse entrepreneurs and motivate them to undertake productive investments that otherwise may not materialise.
Stating that these were challenging times for the industry with negative investment sentiment, the falling rupee and contraction in industrial production, Mr Rajan Bharti Mittal, past-President, Ficci, added: At such a time it is imperative to use the Budget instrument to initiate new reforms with a view to energising growth. It is time for the Government to think of out-of-the-box solutions.
The proposals mooted by Ficci for indirect tax include introduction of alternative measures in lieu of the refund mechanism, to ensure refund is granted in a time-bound manner, and reduction of the Central sales tax rate to 1 per cent.
On foreign exchange transactions, the Chamber stated that to avoid hardship to taxpayers, losses on account of foreign exchange should be allowed as revenue expenditure. Unrealised year-end mark-to-market losses and forex derivative and hedging transactions should be specifically excluded from the definition of speculative transaction.
Ficci also suggested a number of proposals on service tax. These include expansion of scope of the term input services' under Cenvat Credit Rules, 2004 so that credit for all the services used in business is available, clarity on point of taxation in case invoice is raised or services are provided before services became taxable, and extension of time limit for revision of service-tax returns.