Corporate sector of India has bagful of expectations from forthcoming Union Budget 2008-09. Every sector of Indian industry has pinned its hope on P. Chidambaram, the finance minister. They have been meeting and delegating the FM and top Finance Ministry officials for the last months and hope that their demands would be met by the FM, as they are necessary.
The Government must take steps to enhance competitiveness of Indian textile industry. It must focus on addressing various disabilities arising in manufacturing, bridge the demand supply gap in critical inputs and encourage brand building. Measures such as rebating levies, reimbursement off the cost of infrastructural disabilities (transaction costs) amounting to 7% would go al long in encouraging textile industry.
Broking firms demand the securities transaction tax (STT) to be rationalised. STT is currently being levied at the rate of 0.125% for capital market transactions and 0.017% in the derivatives segment. There should also be clarity on how the stock market gains are taxed. It should be clear whether stock market gains would be taxed as capital gains (short term and long term capital gains) or business income. The applicability of STT on arbitrage trades is unclear. It should also be addressed.
Oil Exploration Companies hope that they would be exempted from paying service tax of 12 per cent. The likely waiver of tax is aimed at encourage global companies to bid for exploration licences. The industry has been saying that the introduction of the tax is bringing uncertainty in the sector, since the cost of services have more than doubled in the last couple of years.
Pharma R&D sector has has sought strong budgetry support from the government by demanding extension of the tax benefits of Section 80 1 B (8 A) for pure research and development-based companies. According to them this would signal the beginning of India's global strength in R&D and help create a market capitalisation of research-based companies to more than $100 billion by 2015. This will also benefit R&D spin offs of Indian biopharma companies on the stock exchange.
Expiry of tax concessions available to IT industry after fiscal 2008-09 is a major worry for the sector. The industry gets tax exemptions under Sections 10A/10B of the I-T Act under Software Technology Parks of India (STPI) scheme. The scheme would end in the year 2009 under the sunset clause. Software sector is among the largest employers in the service sector and is growing at a rate of over 33% a year. It is also one of the foremost contributors in terms of earnings through export.
Packaged drinking water can be exempted from 16% excise duty. Experts have long wanted packaged water to follow fruit juices and drinks duty structure, which attracts zero duty. Food processing industry has strong backward and forward linkages with water. For the past three years Finance Ministry has been providing major sops to the industry and this time too same is expected off him.
The government can cut duties on crude oil and petroleum products to counter burgeoning global oil prices. This would include reduction in customs duty on crude oil (from 5% to 2.5%); petrol and diesel (from 7.5% to 5%); aviation turbine fuel (from 10% to 7.5%); and naphtha, natural gas and non-domestic LPG (from 5% to 2.5%). Excise duty on petrol and diesel may also be reduced by around Re 1/litre, sources said. It is estimated that a Rs 1 cut in excise duty could reduce under-recoveries of oil companies by around Rs 6,650 crore annually.
Agriculture has witnessed dismal 2.2% growth and the government is expected to do something special for the sector. The government needs to revive agricultural growth on high priority, help the unorganised sector and rejuvenate rural economy. Agri economists have been exhorting the government to implement the recommendations of Swaminathan Committee in totality. The fact remains that agriculture continues to be the most fundamental instrument for sustainable development and poverty reduction.
Cement Industry has asked FM to reduce local levies and reimpose countervailing duty (CVD) on imports in the forthcoming Budget. The government had slapped a dual duty regime on them last year. This would make the product more affordable, especially for housing and infrastructure projects. Ficci has also urged for a deduction in VAT on cement. It has demanded that the current rate of VAT on cement, which is 12.5%, be reduced.