Kelkar proposals will be adopted: CII

The Confederation of Indian Industry is confident that most of the recommendations of the Kelkar committee on taxation will be implemented in the forthcoming Budget.

According to CII's Economic Affairs Committee chairman Sunil Kant Munjal, before finalising the report, the Kelkar committee had held wide-ranging discussions with various ministries and departments so that they could approve the proposals in principle.

"This is the impression we got from our interaction with different ministries," Munjal told mediapersons in Hyderabad on Tuesday.

Conceding the government might face problems in accepting some of the recommendations, Munjal said those reforms would have to be introduced one day or the other. He felt the process would be completed in the one or two years.

Munjal said major changes in the tax structure were necessary to achieve an 8 per cent annual growth rate during the Tenth Plan.

The CII has identified textiles and tourism as the thrust sectors, which could bring about a higher growth rate.

It has expressed its views on the proposed changes in the tax structure in a note to the finance ministry.

The key suggestions made by the CII, according to Munjal, include  the abolition of the minimum alternate tax and the 5 per cent surcharge on personal and corporate  tax, the reduction of corporate tax rates to 30 per cent, the elimination of the dividend tax at the hands of recipients, indefinite carry-forward of business losses and unabsorbed depreciation, maintaining the existing differential in depreciation rates between the Income Tax Act and the Companies Act, and the existing benefits under Sections 10A and 10B.

On personal income tax, Munjal said the chamber had suggested four slabs, with tax emption up to Rs 150,000, 10 per cent tax on income between Rs 150,000-300,000, 20 per cent tax on Rs 300,000-500,000, and 30 per cent tax above Rs 500,000.

The CII further suggested the rebate for senior citizens should be  maintained at Rs 15,000, the existing tax incentives on housing  loans should be retained, and the tax deduction for medical expenses should be increased from Rs 40,000 to Rs 50,000.

Munjal said the chamber had made a strong case for the growth of textile and tourism since both the sectors had huge growth potential and large employment opportunities.

He said if thrust was not given to the textiles and garments sector today, "we run the risk of being  overwhelmed by China tomorrow."

The CII has recommended an 8 per cent excise duty on yarn, woven and knitted fabrics, garments and made-ups.

It has also argued the small-scale sector reservation for the knitting sector should be removed.

Munjal said the trade association had suggested a small part of the foreign exchange reserves should be used to set up a 'Created in India Fund' for marketing and branding Indian textile abroad, a 'Garments and Textile Modernisation Fund' for financing import of state-of-the-art equipment, and a 'Global Textile and Garments outreach Fund to help acquiring textile, garmenting and allied companies abroad.

For tourism, Munjal said the CII had recommended the setting up of a Cabinet committee on tourism under the chairmanship of Prime Minister Atal Bihari Vajpayee, the outlay on tourism to be at least 3 per cent of the Budget outlay for the next five years, the setting up of an India marketing board along the lines of the Singapore Tourism Board, a National tourism fund from the proceeds of the disinvestment of hotels, the withdrawal of the 10 per cent expenditure tax, and infrastructure status to the tourism industry for tax purposes.

The chamber has also said there has to be a major thrust on  irrigation if agriculture has to benefit from a 3 per cent compound annual growth rate over the next decade.

The government should structure an irrigation grant system for states, based on targets, goals and achievements, it added.