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Resist populist pressures, says industry body

By Our Special Correspondent

NEW DELHI, JUNE 22. While asking the Government to ensure implementation of VAT by all States from April 1, 2005 without any further delay, the Confederation of Indian Industry today counselled the Government against giving in to populist pressures. It also asked the Finance Minister, P. Chidambaram, not to raise rates for taxes, including the service tax, and sought a rebate on corporate tax.

Talking about India Inc's expectation from the Union budget and spelling out what the Finance Minister should and should not do, the new CII chief, Sunil Kant Munjal, told The Hindu that the Government should evolve a national consensus on five or six critical issues and widen the tax base for raising additional expenditure and meeting the needs of the social sector.

Criticising the tendency to extend freebies such as free power, he said that such tendencies need to be curbed strictly as these had become a "tool for electioneering." "Somebody somewhere pays for it. Nothing comes free," he added.

Hailing Mr. Chidambaram as a knowledgeable and competent person, Mr. Munjal said the Minister knew how to handle and balance things.

Spelling out what the Government should do to facilitate economic growth and meet its social obligations, Mr. Munjal said there was need to widen the tax base, offer incentives for creating additional capacities, invest in infrastructure and social sector and effect reduction and better targeting of subsidies. The Centre should also see that implementation of VAT (although a State subject) is not delayed any further since continuous delay was creating an atmosphere of "uncertainty."

Apart from the implementation of VAT, another important area was introduction of incentives for capacity building for corporates, Mr. Munjal said, adding that more and more companies need to scale up their capacity. Otherwise, they would not be able to meet the increasing demand and competition.

Calling for abolition of tax on dividend, he said cess was a good way of mobilising resources but it was important to ensure that it would be used for the specific purpose it had been levied. The model involving funding of highway projects through cess on petro products could be emulated. The CII has suggested a five per cent cess on rail travel for development of rail infrastructure.

He welcomed the Government's proposed cess on all Central taxes to provide resources for universal quality basic education.

He said that with the Prime Minister, Manmohan Singh, at the helm and Mr. Chidambaram as Finance Minister, the industry was confident that the UPA Government would come out with a reform-oriented and forward-looking budget, Mr. Munjal said.

He said the CII was ready to offer its forum for a national debate on the controversial issue.

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