India Inc, which is on a major acquisition spree abroad, has sought government incentives to support its global ambitions. In its wishlist for Budget 2007, industry sought a slew of tax benefits, reduction in corporate tax rates and removal of fringe benefit tax (FBT).
In the pre-Budget meeting with finance minister P Chidambaram, industry captains asked the government to give tax benefits to support domestic companies that are acquiring companies abroad. They also wanted government to bring down incidence of total tax from about 38% to 25%.
The suggestion was put forward that there be incentives from the government certain tax benefits to support the Indian companies going global. Companies such as Tata Steel must be given incentives for its acquisition bid for Corus as its Brazilian rival CSN is also being supported by the government, said Videocons VN Dhoot.
The demand comes amidst heavy-duty action on the global M&A front, with the Tatas slugging it out with Brazils CSN for Corus and Videocon trying to salvage its bid for South Koreas Daewoo Electronics. Domestic industry has been on a global acquisition drive, spending close to $9.9 billion on buying companies abroad in 2006, according to Grant Thornton.
According to sources, Tata group chairman Ratan Tata is believed to have suggested that the government should encourage special economic zones (SEZ) to create employment and ensure industry gets raw materials at internationally-competitive prices.
Bhartis Sunil Mittal is learnt to have proposed the correction of the inverted duty structure and reduction in service charges paid by telecom companies to the department of telecommunications. We have asked for a growth Budget, he said.
Reducing the corporate tax from 30% to 25%, removing FBT on sales promotions, increasing depreciation rates to 25% for tax purposes and moving towards an effective goods and services tax of 15% in the next few years were some other key recommendations.
Infrastructure and support to R&D were high on industrys mind too. There was an across-the-board recommendation for extension of the weighted deduction for R&D expenses, which is due to expire in March 2007, indefinitely, and if not that, at least for another 10-15 years, said Ranbaxy CEO and MD Malvinder Singh.
Notwithstanding the finance ministers speech on Monday where he hinted at fewer tax exemptions going forward, the industry also asked for tax exemptions to encourage investments in infrastructure. TVS CMD Venu Srinivasan said, As a two-wheeler manufacturer, I suggested that the urban infrastructure needs to be improved.
Extension of the textile upgradation fund scheme (Tufs) for the textile sector, correction in anomalies of excise and Customs duties and were other key recommendations. The meeting was attended by Ratan Tata, Sunil Mittal, Malvinder Singh, Venu Srinivasan, VN Dhoot, Kiran Mazumdar-Shaw, Saroj Poddar, Swati Piramal, Kiran Karnik and R Seshasayee.