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The Budget wishlist - More sops and lesser taxes
February, 16th 2010

Budget 2010 -11 will be announced on February 26 this year. Like all other stakeholders, the ministry of food processing industries will be placing its bets right. It has been asking the government to allow FDI (Foreign Direct Investment ) in retail segment which is directly connected to the food processing industries. Also the target of the ministry is to get taxes on the perishables to 0% and on non-perishables to 4% with the help of the state governments.

Abolition / amendment of APMC Act and introduction of separate food processing policy in all the states will be its prime agenda. It will look forward to encouraging third party investments in the farming sector to enable assured income for the farmers. Above all, in its attempt to tread towards the target Rs1 lakh crore investment by 2015, the ministry will look at the private sector in desperation.

The Budget demand from the industries somewhat echo the estimation and expectation of MoFPI. So, as the finance ministry prepares itself to announce the Budget, amidst the critical economic crisis in the country, industrial bodies and personnel express their demands to the government for considering certain inclusions, exclusions, incentives, tax strategy, etc. for the food processing industry.

To stimulate the growth of the food processing sector and minimise waste, FICCI has suggested immediate policy interventions through a 16-point package of measures to streamline and augment the entire agri supply chain, clogged as it is with several intermediaries including farm processors, distributors, and retailers.

It has suggested that the government needs to initiate fiscal measures to enhance R&D activities in food processing sector.

All agricultural based products should be tax exempt or concessionally treated.
9679# Import of plant and machinery for food processing sector should be exempt from custom duty.

Zero custom duty on hulled / rolled / flaked oats.

VAT on all food products as also on packaged drinking water be at the rate of 4%.

Dairy: Incentivising the skimmed milk powder / full cream milk powder exports. Presently, the government is providing duty drawback facilities at varying rates for export of some dairy commodities. In the case of casein, the duty drawback is 14%. The dairy sector has advocated that export of milk powder in bulk be provided duty drawback at par with casein and the like.

Sugar confectionery products containing/ not containing cocoa are subject to variable rate of excise duty, whereas identical products like biscuits, ice creams whether or not containing cocoa are subject to excise duty as applicable to the generic category. Discriminatory tax treatment is unwarranted and ought to be removed.

Piruz Khambatta, MD and chairman, Rasna
The next Budget should be growth oriented, India can definitely show the world what it makes to be engine of growth.

1. Highest investment in infrastructure is needed.

2. Massive privatisation should be embarked even if that meant selling some of the government PSUs ( Public Sector Units) as government could not be in the business of industries.

3. Inflation should be curtailed with fiscal measures.

4 Direct tax should be reduced to attract more and more people and standard deduction should be increased.

5. To catalyst investment depreciation the slab should be increased and investment in certain investment promotion instruments should get some extra deductions.

6. All food products should be under "0"% tax if not already at "0"% as there was no point in taxing foods.

7. It was necessary to look at exempting income tax on export income.

8. Stimulus measures announced in previous years should still continue till GDP attained a double digit level.

9. Massive investment in primary education and health care. To achieve this, the government should make the class which can afford, fund the education and health care for the masses.

10. Donation under 80G should be given 100% deduction if it is given for education and health care.

Retailer's Association of India

FDI in retail trading should be opened up to substantially improve productivity and distribution system through modern format retailing.

Current FDI policy allows 100 per cent FDI in cash-and-carry wholesale formats and 51 per cent FDI is allowed in single-brand retailing. However, the regulations have been interpreted as guiding to a blanket ban on foreign investments in the sector. Thus, even investments by financial investors like FIIs and PE funds are prohibited, limiting the flow of capital required for the growth of the sector.

A clarification of issues will enable investments by financial investors in the retail sector. This can be done by allowing investments by investors such as FIIs, Venture Capital Funds and other financial investors in the sector.

The labour laws be suitably changed to factor hourly employment. Labour laws be reasonably modified to bring all retail business on par with essential commodities like restaurants etc.

Another initiative which can boost consumption could be a central directive to enable retailers to operate on a 24x7x365 basis, subject to adherence to labour laws.

RAI has welcomed the GST. In line with practices worldwide India should also introduce a system of GST refunds for foreigners purchasing items in the country and taking it abroad (GST refund). This would also complement the "Incredible India" campaign that has been running very effectively by the government.

Consumption incentives:
A reduction in the customs duties relating to consumer items would greatly channelise funds to boost the economy. Providing a consumption incentive in the form of personal income tax relief to consumers, who can spend say up to 25% of their income on consumer goods and services, which can be supported by tax invoices from the retailer/establishment. This shall serve to bring a substantial amount of consumer spendings into the indirect tax net, while incentivising consumers. Such a scheme shall also support the government's current initiatives (e.g "Jaago Grahak" campaign).

Incentivise supply chain and logistics firms to further the growth of this sector.

100% tax holiday in respect of the profits of the undertaking involved in cold chain infrastructure for a period of at least 10 years.

Granting infrastructure status to supply chain/ cold chain infrastructure

Incentives for Investment in transportation infrastructure.

The government could consider introducing some direct and indirect tax benefits for the retailers, specifically those operating in rural areas/ areas requiring special economic attention.

Abhay Kewadkar, business head (wines) & chief wine maker, director - Four Seasons Limited, United Spirits Limited, Bangalore

The wine industry calls for a reduction of import duties and reduction in interest rates.

Wine industry is very capital intensive. To make wines of good international standard, a lot of equipment are required to be imported as they are not manufactured in India.

The Budget recommendation on wine industry in India is to reduce import duties on equipment required particularly on those which are not manufactured locally.

Wine industry also needs a lot of working capital as wines are required to mature over longer periods in order to have good quality. The Union government must consider a reduction in the interest rate on working capital from the present 12% to 5%.

The cost of growing wine varieties of grapes in India is extremely high owing to high capital cost and the fact that the first crop is harvested three years from planting.

This makes export of Indian wine highly unviable. Therefore, there is a need to reduce the interest rate on loans on vineyards of 5% to match with international norms. In addition, the sector is also looking to the government for subsidiaries to wineries exporting wines, said Kewadkar

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