The government should reduce excise duty and service tax to 8% and raise income tax exemption limit to Rs 3 lakh in the next Budget to promote investments and boost economic growth, Assocham today said.
In its pre-Budget memorandum for 2013-14, the chamber also suggested Finance Minister P Chidambaram raise the limit on interest on housing loan to Rs 5 lakh to revive consumer demand and boost investment.
"In the current economic environment of falling GDP growth and recession in many parts of the global market, it is crucial that forthcoming Budget addresses indirect tax issues currently facing industry and services sector," Assocham President R N Dhoot said.
He said the excise duty and service tax rates should be restored to the earlier level of 8% prevailing two years back. Currently they are 12%.
"This move will give a very big boost to the Indian industry," he said adding "the reduction in these rates would help in boosting the industrial growth, which has significantly fallen due to low capital investment and high inflation".
The Indian economy grew by 5.3% in the July-September period of the current financial year (2012-13), pulled down by poor performance of manufacturing and agriculture sectors.
Dhoot also sought reduction of corporate tax to 25% from 30%, besides demanding grant of infrastructure status to special economic zones and industrial parks.
When asked whether these demands are realistic on the back of high fiscal deficit, he said the tax base for goods and services has already expanded to generate high revenue.
"The government can selectively increase customs duty rates to neutralise the effect of lower tax rate of excise duty and service tax," he told reporters here.
Further justifying the demand for tax reduction, he said that at a time when the global economy is passing through tough times, industry is facing competitive disadvantages.
This was due to complex multi-layered indirect tax structure which is having an cascading effect on cost and prolonged tax litigation, it said.
On housing loan, the Assocham President said the limit of deduction of interest on housing loan should be increased to Rs 5 lakh from Rs 1.50 lakh per annum to boost the housing sector as also to give relief to middle class families.
He also suggested increasing customs duties on finished goods to protect the domestic industry from unfair competition from countries like China.
The chamber also urged the Finance Minister to announce tax holidays for the energy sector saying it is paramount to India's economic growth.
Further it sought withdrawing minimum alternate tax on SEZs to revive these zones.