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Demands direct tax rationalisation, Minimum Alternative Tax reduction in budget
February, 16th 2010

Ahead of Budget, an industry body has suggested government a slew of measures to boost industrial growth, including simplification of tax procedures, rationalisation of direct taxes and reduction in Minimum Alternative Tax (MAT).

Rationalisation in direct taxes is among the critical policy instruments with which government can help manufacturing sector consolidate its positions not only to mitigate the effects of global slowdown, but also to facilitate its transition to next level of growth, the Confederation of Indian Industry (CII) said in statement .

In a pre-Budget memorandum to Finance Minister Pranab Mukherjee, the business chamber called for boosting investment and employment through fiscal incentives at a time when non-food credit is growing at 15 per cent, compared with 30 per cent before the onslaught of the slowdown.

For promoting investment, the apex chamber is in favour of substantial rationalisation of MAT.

MAT was introduced to counter the rapid increase in the number of zero tax companies arising out of tax exemption, deduction and higher depreciation and also for widening the tax net.

The rate, which has been increased gradually to 15 per cent last year, is a high rate that dilutes the incentives available to industry.

To attract investments in research and development (R&D), the industry body wanted the tax incentives to be extended to all sectors of manufacturing for a further period of 10 years.

Currently, 150 per cent weighted deduction on expenses incurred on in-house scientific research is available to select sectors.

CII also wanted a raise in depreciation on plant and machinery from 15 per cent to 25 per cent to enable the industry stay competitive by overcoming technological obsolescence.

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