The Indian industry on Tuesday asked the government to cut personal and corporate tax rates in the coming Budget and impose 35 per cent import duty on Chinese products to offset rupee's appreciation against the yuan.

The industry placed these demands during the customary pre-budget consultations with the finance minister, saying the steps were necessary to spur consumption and investment level - key to sustaining economic expansion.

Although the industry wanted him to impose 35 per cent import duty on Chinese products, sources quoted Finance Minister P Chidambaram as saying that that rupee appreciation has not been much in terms of real effective exchange rate. The minister felt that though there were reports of a dip in exports due to rupee appreciation, tax collections did not corroborate this.

Sources said Chidambaram was of the view that industry and services sector need to sustain high growth rates, as four per cent growth in agriculture alone would not help achieve 9-10 per cent economic growth. For this, the industry sought greater tax concessions.

"The peak income tax rate should be reduced to 25 per cent from 30 per cent and should be levied on more than Rs 5 00,000. Corporate tax rate should be retained at 30 per cent but 10 per cent surcharge on it should be withdrawn," Assocham president Venugopal N Dhoot told reporters.

He also wanted tax concessions for India Inc making acquisitions abroad. The pharma industry asked the finance minister to expand the scope of tax rebate to third party R&D activities instead of just in-house activities.

Chidambaram is also understood to have said that curbing inflation was a major concern, but the government does not have entire control over crude, food and commodity prices.

FICCI President Habil Khorakiwala wanted the minister to reduce corporate tax rate to 25 per cent from the current 30 per cent to boost the manufacturing sector. "Since lowering of tax rates has yielded more tax revenue, we have requested the Finance Minister to further cut corporate tax rates," CII President Sunil Bharti Mittal said.

Industry players also wanted reduction in excise duty, removal of fringe benefit tax on business promotion expenses, retaining customs duty at 10 per cent and extension of tax benefits for IT sector beyond 2009.

Larsen & Toubro chairman A M Naik wanted 35 per cent special import duty on Chinese products to help Indian firms compete against their exports as the communist nation has not allowed its currency to move according to market forces.

"Rupee appreciation has been troubling us. But we have special problem with China. Rupee is floated, Chinese currency has been suppressed by 35 per cent. Together with rupee appreciation, the difference has now become 40 per cent," Naik said.

Dhoot also wanted another package for exporters. He said since banks have not reduced lending rates by 50 basis points, as requested by Chidambaram, banks should be given some kind of "help" to go for interest rates cut.

Ranbaxy [Get Quote] CEO Malvinder Mohan Singh demanded 150 per cent weighted deduction in tax for in-house research and development activity to be extended to all R&D activities.

Swati Piramal of Nicholas Piramal [Get Quote] wanted tax concessions also for those companies, which are into pharma research and development but not into manufacturing.

Finance Minister P Chidambaram in a pre-Budget meeting with industrialists at his office in New Delhi on Tuesday.

PTI Photo by Vijay Verma

Text: PTI