At the pre-budget Consultation meet with
the Finance Minister, Mr. Arun Jaitley, CII President Ms. Shobana Kamineni
presented the industry body’s recommendations for the Budget. With the Budget
being presented at a time when the economy is on the cusp of a recovery, the
main focus of the recommendations was on how the recovery process can be
strengthened without compromising the government’s fiscal targets. The CII
President said that the Minister was very receptive to the ideas presented by
her.
To strengthen the package for the
turnaround of the banking sector, the CII President said that the government
needs to lower its stake in public sector banks to 52% and progressively to
33%. The banks may be allowed to reissue the recapitalisation bonds and
securitize good loans.
The power sector is in urgent need for
reform to address challenges in distribution and prevent a build-up of stressed
assets. A unique idea presented by CII is the creation of a National Power
Distribution Company which can buy power from stranded assets and help
formulate a national pricing benchmark. The involvement of the central
government is required alongside states to sort out the issues in the power
sector, she said.
Land is a scarce resource and many public
entities hold excess land in urban areas. A Land Bank Corporation should be set
up by the government to create a publicly accessible inventory of such land and
raise resources for the government by monetizing land. This could be a huge
source of land for industry which wishes to invest.
Investments in physical and social
infrastructure need to be commensurate with what the country needs. While the
government needs to step up its capital expenditure, it is also important to
revitalize Public Private Partnerships in the country. Large amounts are locked
in arbitration, and there is a need to ensure contractual sanctity by putting
into place effective independent regulators. All efforts to strengthen the
Municipal Bond Market would be helpful to raise funding for cities.
In health and education, the government
needs to step up its spending and create separate funds. A fund of Rs 10,000
crore for teacher training would go a long way in boosting technology usage in
schools. CSR contribution of companies can be attracted to augment this fund
with simple incentives in the form of giving a 150% weightage, while
calculating the CSR numbers for the year.
To reap the benefits of large scale
scientific farming,the contract farming laws need to be amended to allow
leasing of farm lands to corporates/growers without transfer of titles. CII has
also suggested an Empowered Group of State Agriculture Ministers be formed to
implement reforms in agriculture.
On direct taxes, it is suggested that a
roadmap for reduction in the corporate tax rate be laid out. CII suggests that
this should be brought down to 18% at the earliest with withdrawal of tax
incentives and exemptions and withdrawal of surcharges and cesses. This will
send a powerful message to Indian industry and global investors that India is
an attractive investment destination and will be a huge enabler for job
creation.
In line with the goal of promoting a
cashless economy, CII has suggested that cash transactions above a particular
threshold be penalised by levying a cash transaction tax. The merchant and the
consumer should be incentivised with tax breaks for using and accepting Debit /
Credit Cards.
The government needs to extensively use of
IT tools, Data Analytics, etc with minimum taxpayer interface, so as to track
undeclared wealth and improve tax administration system. The Blockchain
technology should be explored for greater tax compliance and reduction of
evasion.
Finally, on GST, CII believes that the tax
will transform the indirect tax system and usher in a harmonised national
market of goods and services. By paving the way for formalization of the
economy and moving towards a simplified, assesse-friendly tax administration
system, it is deemed to contribute significantly to the growth of the economy.
CII suggested that for the tax to be truly transformative, there is need to
move towards just three rates – a ‘standard’ rate for items of mass consumption
which will merge the 12% and 18% rates into a single rate; a rate of 28% to
apply to demerit goods and a rate of 5% for merit goods including goods used by
the poor. Further, CII suggests that the government should actively consider
inclusion of key sectors such as petroleum, real estate, alcohol and real
estate within the ambit of GST while extending quarterly return filing across
the board and not just to SMEs.
CII strongly advocates resolving the
problems on account of input tax credit so that onward recipients of
goods/services are not penalised for the fault of the previous vendor in the
chain. Similarly, the problem of multiple registrations needs urgent
resolution.