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Manufacturing, infrastructure and energy sectors need fresh impetus

ASSOCHAM president elect Mr Rajkumar Dhoot emphasized the need for new impetus to manufacturing sector, boost in physical and social infrastructure with large doses of investments and tax relief, and ensuring energy security with tax holidays for oil and gas exploration activities.

At the pre Budget discussion with finance minister Mr Pranab Mukherjee, he also called for greater interaction and coordination between the industry and the government to keep up the economic growth momentum.

Mr Dhoot institutions like India Infrastructure Finance Company Limited and Life Insurance Corporation should disburse more funds for developing infrastructure while the government coordinates effectively for timely clearances, approvals and implementation of projects.

To curb the menace of black money, laws must be enacted to ensure transparent public funding during elections. Immunity should be provided to persons declaring unaccounted money so that funds stashed abroad illegally get back into the country’s economic system.

Mr Dhoot said there is urgent need to improve social infrastructure and public private partnerships must be encouraged to provide education, healthcare and clean drinking water for all citizens.

For the manufacturing sector which can create lakhs of new jobs, investment allowance should be introduced as deduction from profit to the extent of new investment in plant and machinery. The rate of depreciation on plant and machinery should be restored to 25% from 15% currently. He said that “The increase in rate of depreciation in long run is revenue neutral as the total amount cannot exceed the cost of assets.”

Mr Dhoot said that tax benefits to hill states and northeastern states should be extended for two more years. ASSOCHAM believes integrating excise and service tax into central Goods and Services Tax will make the Indian industry competitive.

The chamber fully supported the government’s initiative to widen the base of service tax and cover all services except those in the negative list. However, the definition of service should not include any capital account transactions like buying or selling property, loans in any form, money, actionable claims and gifts.

Mr Dhoot said any increase in service tax rate of ten per cent will affect companies’ growth and in turn the tax collections. Commercial rentals which are a cost to the retailer should be exempt from service tax.

Oil and gas exploration is strategically important for the country as significant foreign exchange reserves are spent on imports amid volatile prices in international markets. Like infrastructure, the exploration and production industry is also highly capital intensive.

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