Consumption demand for industries seen going up

Our Bureau

Grey areas

Service tax

hike to impact IT and export-oriented industries.

Absence of

a roadmap to reduce the CST is a disappointment.

Bangalore, March 1

The reduction in excise duty for textiles, automobile, steel, food and aerated drinks proposed in the Union Budget 2006-07 would give a fillip to the growth of the respective industries with demand for consumption going up, said the Bangalore Chamber of Commerce and Industry (BCCI). In his reaction to the Budget proposals,

Mr Anant R. Koppar, President of BCCI

, said, "On the whole, he has maintained the status quo, but could have done more to further augment and sustain the country's long-term growth prospects."

The industry was disappointed, as the option of a flat tax rate had been ruled out with the continuation of the Fringe Benefit Tax and the increase of Minimum Alternate Tax from 7.5 per cent to 10 per cent, including long-term capital gains tax in MAT. This would have a negative impact and hence a retrograde measure.

The increase in service tax by two per cent to 12 per cent would have a major impact, particularly on the Information Technology and export oriented industries as they would not be able to claim setoff in the absence of taxable output services. The other disappointment was the absence of a roadmap to reduce the Central Sales Tax from four per cent to two per cent, Mr Koppar said.

On the infrastructure front, the announcement of seven ultra mega power projects, especially the Karnataka Project to come up in the coastal region, has been welcomed by the Chamber. It said the Bangalore-Chennai highway proposal would also help in accelerating industrialisation in that belt.

Mr C. Valliappa, Chairman of the Karnataka Textiles Mills Association

, said the reduction in import duty and central excise on man-made fibre yarn were steps in the right direction.

Stating the industry should pass on the benefit to the consumers, he said the State Government should take advantage of the Budget proposal to rehabilitate the textile sector and prevent them from relocating to neighbouring states.

(This article was published in the Business Line print edition dated March 2, 2006)
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