The Hindu : Tamil Nadu News : `Optional tax regime imaginative'

Online edition of India's National Newspaper
Friday, Jul 09, 2004

Tamil Nadu

Tamil Nadu

`Optional tax regime imaginative'

By Our Special Correspondent

(From left) K. Sridharan, Executive Director, Ashok Leyland; R. Parasuraman, deputy chairman, Confederation of Indian Industry (Southern Region); Shobana Kamineni, chairperson CII (SR); and V. Srinivasan, chairman, WS Industries (I) Ltd. at a discuss ion on the Union Budget in Chennai on Thursday. — Photo: V. Ganesan

CHENNAI, JULY 8. The organised sector of the textile industry in Tamil Nadu is happy over the new tax regime for the industry, introduced in the Union budget. But other sectors in the manufacturing industry have given the budget with a muted welcome.

"It (the optional tax regime for various stages in the textile value chain) is very imaginative. Manufacturers can choose whichever system they want and at the same time the Government will realise higher revenue because the present provisions of deemed credit will go. It provides a level-playing field and is a win-win for all," said Manikam Ramaswami, an industry leader, participating in a press conference organised by the Confederation of Indian Industry-Southern Region (CII-SR) here today.

The CII-SR leaders pointed out that the actual impact of excise exemption granted for tractors and computers would depend on the extent of loss of CENVAT credit. A senior official of a tractor company said that in reality there would be no benefit as far as tractors were concerned. Inputs involved in the production carried an excise of 16 per cent. If the excise on inputs exceeded 12 per cent, the benefit of removal of the excise on the final product would be more than neutralised by the loss of CENVAT credit on inputs.

V. Srinivasan (auto components sector) said while the assurance on introduction of value-added tax (VAT) from next year, tax relief on research and development (R & D) and dereservation of several products were welcome, there was "no single, focussed effort to revive manufacturing." "There is only tinkering. This will not help to make India a global sourcing base (for automobiles and components)," he said. Industry leaders were, however, happy that the Government had vindicated the CII's emphasis on strengthening the manufacturing sector as a whole by setting up a commission to promote its competitiveness

T.T. Ashok, Chairman, CII-Tamil Nadu, said the budget failed to address issues related to the credit guarantee fund and bank financing faced by small and medium enterprises. However, the intention to encourage micro-enterprises through self-help groups (SHGs) was laudable.

T. Kannan, talking from the human resource perspective, said the emphasis on upgrading of Industrial Training Institutes (ITIs) and the plan to set up a manufacturing council would benefit industry.

Shobana Kamineni, Chairperson, CII-SR, said the budget indicated a "strong Government" and continuity of reforms, with an overdue focus on agriculture. While there were concerns about the increase in the rate of service tax and higher excise on steel, the proposal to encourage private hospitals in small cities and towns was a progressive measure.

P.K. Mohapatra (RPG group) said if the States heeded to the Union Finance Minister's advice to remove constraints on the movement and marketing of farm produce, it would spur value addition to farm products. Absence of major measures to promote exports and expand the base of direct taxation were other aspects of the budget, over which the participants expressed concern.

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