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Create more avenues for strategic investments in infrastructure
March, 10th 2012

There is an urgent need for capital investment in India's infrastructure, to improve the county's roads, ports, airports, power plants, transportation systems, warehousing system, cold-chains, and so on. The Government needs to incentivise investment in these crucial infrastructure projects.

We expect the policy-makers to focus more on multi-modal transportation and create avenues for strategic investment in infrastructure which would ease some of the infrastructure bottlenecks the industry faces.

STIMULUS PACKAGE

The reduction of excise duty and service tax rates under the stimulus package' announced by the Government in 2009 should continue in view of the impending economic slowdown in light of high inflationary rates.

We recommend early adoption and enactment of the Goods and Services Tax regime (GST). Further, all indirect taxes on goods and services including octroi, entry taxes, electricity duty, etc., can be subsumed under and merged into the GST.

For a smooth transition to the new regime, enough time must be given to the industry to prepare its systems to be in readiness. It must be ensured that there is extensive training and communication for industry and government agencies for its smooth implementation.

DECLARED GOODS' STATUS FOR AVIATION FUEL

The Ministry should address the increasing cost of ATF which is priced much higher than international benchmarks. Today, excessively priced jet fuel (ATF) in India is a significant cost in air travel operations. There is a case for ATF being given a declared goods' status to attract a uniform VAT of 4 per cent across India. I also wish to reiterate our annual request to provide industry status to the sector.

TAX EXEMPTION ON LEASE RENTALS

Aircraft given on lease by foreign companies come with a tax arrangement. The tax, if any, on aircraft lease rental income is to be borne by the lessee.

The Income-Tax Act provided for income-tax exemption on lease rentals paid by an Indian company to foreign companies, subject to the Central Government approval. This exemption was withdrawn by the Finance Act 2007, which has, as a result, increased the cost of air operations.

We recommend the re-introduction of the exemption Section 10 (15A) in the Income-Tax Act which will give some relief to the already burdened aviation industry, saddled with a multiplicity of taxes on its air operations.

DEPRECIATION RATES

To keep pace with the technological advancements and to give a fillip to investments in capacity creation there is a need for the present depreciation rates to be increased for plant and machinery.

REDUCTION IN INTEREST RATES

Though not linked to Budget, reducing interest rates is extensively important to boost the sagging demand and reverse the slowdown in investments.

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