The Federation of Indian Chambers of Commerce and Industry (FICCI) has urged the Government to provide exemption from tax withholding on interest payments made in respect of foreign commercial borrowings.

Currently, all interest payments on external commercial borrowings (ECBs) attract tax withholding, resulting in higher cost of borrowing for the domestic industry. This is because the foreign lender is unwilling to absorb the tax liable or withheld in India.

The demand for restoration of exemption from withholding tax was made at a pre-budget meeting that representatives of FICCI had with the Revenue Secretary, Mr Sunil Mitra, in North Block today.

Maintain stimulus

At the meeting, the FICCI President, Mr Rajan Bharti Mittal, also cautioned the Government against any further stimulus withdrawal in the ensuing Budget in view of the looming threat of a double-dip recession in North America and the current sovereign debt crisis in several European countries.

Mr Mittal today urged the Revenue Secretary to desist from tinkering with existing rates of customs and excise duties and service tax. The Centre had in Budget 2010-11 initiated stimulus withdrawal by resorting to hike in excise duty besides levying customs duty on crude oil imports.

He said Surcharge and Education cess have complicated the tax structure and needs to be withdrawn. The Government, he said, should allocate a part of Direct Taxes collection for educational projects, instead of having a separate levy by way of education cess.

Agri-infrastructure

Mr Mittal said that private sector investment in agri-infrastructure should be eligible for 200 per cent weighted deduction as is the case with investment in R&D. The benefit should also be available for investments made in agri-R&D and extension services provided to the farmers, the chamber has said.

On corporate tax rate, FICCI has called for reduction in corporate tax rate to 25 per cent and stressed the need to align them with the global average of 24.99 per cent.

The nine-member FICCI delegation was led by the FICCI President, Mr Rajan Bharti Mittal, and included Mr Ashwin Dani, FICCI Vice-President and Vice-Chairman, Asian Paints Ltd; Mr Gaurav Taneja, Chairman, FICCI Taxation Committee and National Tax Director, Technology, Communications and Entertainment, Ernst & Young Pvt Ltd; Mr O.P. Lohia, FICCI Executive Committee Member and Managing Director, Indo Rama Synthetics (I) Ltd; and Mr Shivinder Mohan Singh, FICCI Executive Committee Member and Managing Director, Fortis Healthcare Ltd.

The Finance Ministry recently kicked off its pre-budget consultations with industry with its first meeting being with industry chamber PHDCCI a few days ago.