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Farmers with ability to pay should come under the tax net, says Kolkata Chamber

Our Bureau

Kolkata , July 6

THE Merchants Chamber of Commerce, in its pre-budget memorandum to the Union Finance Minister, Mr P. Chidambaram, has suggested that agriculture, which accounts for nearly 28 per cent of GDP and which has at least 20 per cent of farmers with the capacity to pay tax, should be brought under the tax net by suitably amending the Constitution.

According to Mr K.B. Agarwala, President of the chamber, at least a portion of the huge investments in agriculture by way of subsidy and infrastructure development should be paid back by the farm sector.

The chamber has also called for fixing physical targets against financial allocations for all Plan projects and expenditure heads to eliminate time and cost over-runs and leakage of funds. MCC has also called for a mid-year action report on all projects to be placed before Parliament.

The Indian Chamber of Commerce, while emphasising the need for new fiscal incentives to help boost agricultural growth, has pointed out that agro-processing industries should be given sufficient encouragement to ensure value addition in agriculture and better post-harvest utilisation of products. Mr Anup Singh, President of the chamber, has stated that value creation in the agricultural sector would also generate higher demand for industrial products and provide a fillip to the service industry.

Given the multiplier effect, this would have a significant impact on employment generation as well, it is pointed out. The chamber has suggested that agro-processing industries should be granted 100 per cent tax exemption under section 801A, just as in the case of other sectors like infrastructure. The priority status, according to the ICC chief, would attract investments in this sector and help in raising the farm sector's contribution to the GDP significantly.

On indirect taxes front, ICC has made suggestions to streamline excise and customs laws. On service tax, it is suggested that while the base needs to be widened, it was also necessary to bring down the present rate. Further, agreeing with the Kelkar Committee, the chamber has stated that a threshold limit of Rs 10 lakhs should be provided, below which there should be no requirement for registration under the service tax.

On the personal taxation front, the MCC has called for structuring of the present income slab and tax rates, for relief to the middle-income groups. It has suggested nil rates for annual income up to Rs 75,000, 10 per cent for income between Rs 75,000 and Rs 1 lakh, 20 per cent for income between Rs 1 lakh and Rs 3 lakh and 30 per cent for income over Rs 3 lakh.

According to ICC, dividend tax, which is another levy affecting corporates, was hampering restructuring, because the setting up of a subsidiary by a holding company would entail dividend tax twice, and in case the subsidiaries have their own subsidiaries further, the tax incidence would multiple. The cascading effect must be removed to facilitate corporate restructuring, it is pointed out. According to the ICC chief, it was also necessary to allow tax exemption to Indian companies on their dividend incomes from foreign companies.

Pointing out that there was a plethora of taxes on companies in India, sapping the resources which could be invested for future growth, ICC has suggested that the tax rates should be such as to leave adequate investible funds. The chamber has suggested that corporate tax rate should be brought down to 30 per cent and surcharge abolished. ICC has also sought withdrawal of Minimum Alternate Tax (MAT), which has proved to be counter-productive. Since MAT was in the nature of a deemed tax, tax credit for the MAT amount paid should be adjusted against normal tax payable later, it is pointed out.

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