ASSOCHAM asks for tax cut to boost demand

Industry body Associated Chambers of Commerce and Industry of India (ASSOCHAM) today asked the government to bring down taxes such as corporate and service tax to boost the demand side, but said prices were being determined by market forces.

ASSOCHAM, which convened the meeting of its working group to take stock of the situation emerging due to global economic meltdown, demanded that banks must provide more liquidity to the small and medium enterprises (SME).

"There should be a review of taxes, because this tax regime was during the boom time. Today we need a special one time tax concessions," ASSOCHAM President Sajjan Jindal told reporters here.

He said the tax concessions could be in the form of investment allowance for inflow of more funds or reduction in corporate tax to 25 per cent from 33 per cent.

The chamber would present a paper to the Finance Minister and task force constituted by the Prime Minister.

DLF Chairman K P Singh said the government should roll back taxes that were imposed earlier to bring down inflation.

"We must provide more liquidity to the SME sector.... Banks must allot 20-25 per cent specifically for the SME sector," Jindal said.

Lauding the government for taking a number of steps to pump liquidity into the system, Jindal said banks have surpluses but there is a "crisis of confidence" which needs to be improved.

Asked whether industry would cut the prices as suggested by Finance Minister P Chidambaram, Jindal said: "The prices are dependent on demand and supply scenario. Prices are coming down in any way due to slow demand and it is likely to come down further."