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Our Bureau

New Delhi , June 4

THE Finance Minister, Mr P. Chidambaram, on Friday formally kick-started his pre-Budget consultation process with India Inc, seeking `new and innovative ideas' for spurring investment and job creation in the economy.

In a meeting stretching over two hours, Mr Chidambaram is said to have conveyed at the very outset that he was not interested in knowing the tax-related concerns or wish list of specific industries.

The purpose of the meeting, instead, was to get new ideas from industry head honchos for promoting growth, investments and job creation. The Finance Minister reiterated that he looked at himself as a `Minister for Investments', which was the need of the hour now.

The various apex industry associations, on their part, suggested some broad measures to be taken in the coming Budget to boost investments and help achieve an annual growth rate of 8-10 per cent. All of them were unanimous about reducing the corporation tax rate from 35 per cent to 30 per cent, to bring it on par with the maximum personal income tax rate.

The associations also sought early introduction of a national value added tax (VAT) regime as soon as possible. This national VAT should not exceed the existing 16 per cent CENVAT rate and must simultaneously cover all services with set-offs for all taxes paid.

Interestingly, on the issue of the education cess proposed in the Common Minimum Programme (CMP) of the United Progressive Alliance, there was a divergence of perception within the industry.

The Federation of Indian Chambers of Commerce and Industry (FICCI) emphatically opposed the cess, stating that any effective increase in tax rates was not desirable. The Confederation of Indian Industry (CII), however, did not explicitly oppose the idea of the proposed cess. "There was no one voice on the issue", the CII President, Mr Anand Mahindra, said.

The FICCI President, Mr Y.K. Modi, said that if resources had to be raised to fund education or the social sectors, it should be done through widening of the tax base to at least 15 crore assesses and taxing all services, barring essential public utilities. He further demanded that agricultural income beyond Rs 5 lakh be brought under the tax net.

The chamber also sought annual mobilisation of Rs 25,000 crore through disinvesment or privatisation, the proceeds of which could go to a fund dedicated exclusively for socio-economic development of rural India.

Significantly, amendment of labour laws or extending job reservations to the private sector, as voiced in the CMP, did not figure prominently in today's discussions and none of the industry associations sought to make these real issues.

Some of the individual industrialists made specific proposals to boost investments. The Vice-Chairman and Managing Director of Asian Paints, Mr Ashwin Dani, suggested that units that are located in regions not enjoying specific tax exemptions or rebates be provided accelerated depreciation facility. He also said that the Government should go slow in signing any further Free Trade Agreements till the national VAT regime is put in place "so that the cart is not put before the horse".

Mr Jagdish Khattar, CMD of Maruti Udyog Ltd, called for a policy of scrapping old vehicles, which would give a boost to the domestic auto industry.

The President of the Indian Steel Alliance (ISA), Dr J.J. Irani, urged the Government to focus on infrastructure promotion, particularly low cost housing, which would give a fillip to sectors such as cement and steel.

The President of the Associated Chambers of Commerce and Industry, Mr M.K. Sanghi, recommended that infrastructure companies be exempt from the Minimum Alternate Tax, which is a tax on book profits in case of companies recording zero tax liability as per the Income-Tax Act.

Exporters, on their part, sought a restoration of Section 80 HHC benefits, exempting payment of tax on export earnings. The five-year 80 HHC phase-out schedule has been completed with the year ending March 31, 2004, which means the entire profits from exports would come under the tax net from the current fiscal.

"We would like the Section 80 HHC benefits to be restored so that we can plough back the tax saved to enhance our capacities and achieve scales to take on competition from China. We also want all exporting units in the Domestic Tariff Area who move to a Special Economic Zone or transform into an Export Oriented Unit be eligible for tax holiday benefits under Section 10A/10B", said Mr Rafeeque Ahmed, President of the Federation of Indian Export Organisations.

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