The government should exempt infrastructure projects from excise duty, Value Added Tax (VAT) and Central Sales Tax (CST), until they are commissioned, as these levies increase the capital costs of the projects, an industry body has said.
On account of continuing levying of excise, VAT and CST on road, port, power and oil projects, the capital cost of the these become dearer by over 20-25 per cent, thus increasing the burden on developers before the projects are commissioned, Assocham President Sajjan Jindal said.
The chamber, in its pre-Budget wish list on the infrastructure sector submitted to the Finance Minister Pranab Mukherjee, has also pointed out that the incidence of 10 per cent service tax imposed on the projects during their implementation phase needs to be discontinued, since infrastructure is a priority area for the government.
Assocham said burden of service tax, excise, VAT and CST on all projects question their bankability as developers do not get easy access to liquidity as a result it delays their commissioning.
The chamber said tax exemption limit for certain savings schemes should be increased from Rs one lakh to Rs two lakh and interest earned on infrastructure bonds covered under this cap.