Bengal Chamber of Commerce and Industry

Union Budget (2010-11) :Bengal Chamber of Commerce and Industry’s Expectations
In the context of the worldwide economic recession, the Bengal Chamber expects that the Budget will reduce the corporate tax rate to 25%. This will generate more surplus funds in the hands of companies with consequential favourable impact on investment and growth. At the same time, the rate of short term capital gains tax may reasonably be expected to be reduced to 10% to bring it in line with the lowest marginal tax rate. This would result in giving a boost to the capital market. The earlier rates of depreciation may be restored to avoid hardship to the capital-intensive industries. It is also expected that the Budget will incentivise investment flows into India through attractive investment/depreciation benefits. To accelerate the pace of construction of more hotel rooms, the hotel industry may be declared an infrastructure industry under Section 80 IA of the Income Tax Act. It may be given full benefits of concession for infrastructure facilities available to other sectors like airports and power projects. Regarding personal income-tax, the Chamber expects a substantial increase in the deduction under Section 80C as well as for interest on housing loans. Deduction for health insurance premium under Section 80D is also expected to be enhanced. The Chamber also expects re-introduction of the tax benefit under Section 80L for bank interest, etc and withdrawal of the taxation of Employer’s Contribution to Pension since the benefit is contingent in nature. Regarding taxing of ESOPs, the earlier income tax provisions before FBT was imposed on ESOPs may be brought back by way of exempting the same from perquisite tax and subjecting the subsequent market appreciation to capital gains tax or else the ‘fair market value’ may be determined on the basis of market value on the date of grant of options.Regarding indirect taxes, the Chamber expects the Government to withdraw the excise duty cuts and other concessions given earlier to stimulate the economy. Given the conflicting needs of sustaining industrial growth and keeping the fiscal deficit within manageable limits, the following measures are expected:1. Increase of Excise Duty from 8% to 10% , Service Tax from 10% to 12%2. A Clear Road Map towards implementation of GST with revised date of implementation.3. Few more services will be covered under Service Tax.4. Possible excise duty hike in Steel, Automobile, Cigarettes and alcohol;5. More visibility about 3G auctions and disinvestments programmes.6. Addressing supply side constraints that are pushing up prices. Public Distribution system should be thoroughly revamped.7. More allocation towards Government’s eight flagship schemes for social sector reforms.
By Pallav Gupta (Chairman, Direct Tax Sub-committee, Bengal Chamber of Commerce and Industry) and T B Chatterjee (Indirect Tax Sub-Committee, Bengal Chamber of Commerce and Industry)