Calling for a moderation in indirect taxes levied on the consumer durables sector, C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council (EAC), said the move would provide a boost to the ailing manufacturing sector.
Speaking to the media after a pre-Budget consultation with Finance Minister P Chidambaram today, Rangarajan said: “There are some areas of concern like the manufacturing sector. Some adjustment in indirect taxes on consumer durables is possible to give a push to the manufacturing sector.”
Industrial production in November 2007 declined to 5.3 per cent against 15.8 per cent in the same month in 2006, the lowest since October 2006, when it stood at 4.51 per cent and the lowest in calendar 2007.
During the same month, consumer durables production dipped 4.1 per cent against the 10.1 per cent growth rate recorded a year ago.
Consumer non-durables production also declined to 2.1 per cent in November from a growth rate of 14.8 per cent during the same month the previous year.
Rangarajan also said there is a possibility of increasing public expenditure in fiscal 2008-09, which begins from April 1.
When asked if he had recommended a cut in direct tax rates also, Rangarajan said: “I think (direct) tax rates should be kept as they are. However, some adjustments in income-tax slabs could be possible.”
Rangarajan also discussed the likely trends in the economy with Chidambaram. “The overall view is that the economy would grow at 8.5 per cent in 2008-09,” he said.
The Centre for Monitoring Indian Economy (CMIE) has forecast 9.1 per cent GDP growth rate in 2008-09.
Sorry - this "Direct taxes increased by 25.5%, 25.35, 39.35 and 43% since 2004" should read as "Direct taxes increased by 25.5%, 25.3%, 39.3% and 43% since 2004". Regret the typo error!
PC has gone on record that if voluntary compliance improves, then there is a case for moderation of IT Rates. If this is not an improvement in compliance, then a new definition is to be found for the word 'compliance'. 2004-05 - Rs. 131,988 crores and 2007-08 - expected Rs. 325,000 crores minimum with the current trend of 40% increase. Good efficient tax administration also contributed but taxpayers have vindicated PC's faith.It is time for PC to respond and reduce the tax rates!
How does Dr Rangarajan think that only adjusting 1-2% in indirect taxes will boost demand & the economy but no reduction in IT Rates is necessary? This is typical government thinking. Unless U put more money in the hands of the consumers as PC did in 1997, how will the 2% reduction in CE Duty help? Reduction in tax rates is essential in the face of tremendous voluntary compliance by tax payers for 4 years running. Direct taxes increased by 25.5%, 25.35, 39.35 and 43% since 2004 .. cont
Many parts of manufacturing sector are in serious trouble. Labour intensive sectors like Textile, Handicrafts for exports are in doldrums & the assistance given are hardly adequate. Two wheelers are in serious trouble with falling sales of 7-11% - first time in many years. Here the financing and the increased EMI are the issues. Tinkering with 1-2% in the CE Duty rates will not solve the core issues of boosting the demand. The advent of NANO will compound this financing aspect... contd
Content Guide
