Cii Wants Minimum Alternate Tax To Continue
The Confederation of Indian Industry (CII) is in favour of the government continuing with the minimum alternate tax (MAT). CII president Shekhar Datta said the apex industry body will not approach the finance ministry with an alternative to MAT.
MAT is an interim measure and should continue till there is harmonisation of provisions in the Income Tax Act and Companies Act regarding depreciation, Datta told Business Standard. Till that time MAT should continue. Once harmonisation is achieved MAT will no longer be relevant.
This is significant as the profitability of several top companies has been affected due to MAT as per the half-yearly results. Several industries including former zero-tax corporates have been up in arms against MAT, which was introduced in last years budget, wherein it has become mandatory for firms to pay a minimum tax of 12.9 per cent.
Datta said full capital account convertibility should be first priority of the United Front government.
Convertibility of the rupee on capital account will not only send the right signals to prospective foreign investors but will also encourage industrialists to bring in their `unaccounted money into the country, the CII president told Business Standard.
The budgets thrust should be on high rate of growth and increased domestic savings, he said. The government should also initiate new instruments to increase household savings and cut down on government dissavings, he added.
Datta called for new policy measures to increase domestic demand and the much required investment in various sectors of the economy.
The aim should be to attain at least 7-8 per cent growth of gross domestic product (GDP), Datta said.
The need of the hour is not only to increase foreign portfolio investment but also step up foreign direct investment. For that a conducive environment has to be created to encourage foreign investors, he said.
This, interestingly, is opposite to the stance taken by another industry body, Associated Chambers of Commerce (Assocham), which has raised a debate on whether a 40 per cent cap should be imposed on foreign holding in Indian corporates.
It is true that there has been a general slowdown in industrial growth but the fundamentals of the economy have not been adversely affected. The current account deficit is not alarmingly high, foreign exchange reserves are high and the exchange rate has fluctuated within a narrow band, he pointed out.
For more investment, the government should strive to increase savings in the economy to at least 30 per cent of the GDP. Though domestic savings have been 20 per cent plus of GDP for the past several years, overall savings have been low due to increasing government dis-savings.
Datta said new measures should be implemented to increase domestic savings: like, tax relief on interest payments, hiking the minimum slab for personal income tax to around Rs 80,000 per annum which should ideally be increased to Rs 1 lakh.
Datta also suggested that the stock exchanges be extended to the rural sector so as to enable the rural population to take active participation in the capital markets.
The insurance sector should also be opened to the private sector, the CII president said.
Initially, the government can allow a minority stake to foreign companies if they are not willing to give them majority stake. Again, if the Centre is not willing to allow foreign majors to enter life insurance, then general insurance can be opened to them, Datta added.
Datta also said the government should take steps to boost the capital market. Double taxation should be abolished and companies should be allowed to buy back their shares as a defence against hostile raiders. This, Datta said, will also boost secondary market activities.
The CII president also said the government should allow corporates to invest freely in intercorporate deposits market. The current cap is 30 per cent of net-owned funds and this, felt Datta, should be lifted.