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Indian budget 2005-06 likely to slash duty

Move to reach level prevailing in Asean countries

Pallab Bhattacharya, New Delhi
The Indian budget for 2005-06 to be presented next month is likely to draw a roadmap for cut in peak customs duty to reach the levels prevailing in Asean countries.
Indicating this. Commerce Secretary S N Menon said a slew of proposals had been prepared for reducing customs duty and this would be reflected in die coming budget in order to make Indian exports more competitive.
Menon, who was speaking at an exports award function in the southern city of Bangalore on Tuesday, said the downward trend in customs duty would continue for some more years until it reaches the Asean (Association of Southeast /Asian Nations) level.
India has been aggressively pushing for increased trade ties with all Asean countries as part of its "LookEast" policy initiated in 1991.
Menon's remarks came when die Indian corporate sector, at a pre-budget interaction with Finance Minister P Chidambaram in New Delhi, sought cut in peak
customs duty rate from 20 percent to 15 percent and a three-tier import duty structure with the lowest on raw materials, middle rate on intermediaries and the higheston finished products.
Mukesh Ambani, chairman of India's largest private business house Reliance Industries, suggested a cut in import duty on crude oil, which is said to be the "fundamental building block in the energy sector". Presently the import duty on crude is pegged at 10 percent as against just three percent in Asean countries, he pointed out.
There is unanimity in public and private sector oil industry on the demand for cut in import duty on crude oil because India imports more than 70 percent of its crude requirements.
/An official panel on tax and duty restructuring recently submitted its report to the government in which it is understood to have recommended a cut in import duty on crude and a combination of specific and ad valorem excise duty on products.
Among the demands made by the captains of Indian industry and businesses are cut in corporate tax rate for domestic companies from 35 percent to 30 percent, changing income tax slabs, taxing farm income and an investment-friendly budget to help attain 8-10 percent economic growth.
Businesspersons suggested that the tax base be widened from three crore to 15 crore in order to boost the government's revenue and cut its revenue deficit.
It was also suggested that government speed up special export zones to attract Foreign Direct Investment (FDI) and boost exports.
The corporate sector also wanted flexible labour laws, FDI in real estate, information technology and hardware sectors, long-term finance for developing infrastructure, raising FDI limit in sensitive telecom and insurance sector.
The recommendations also included rationalization of tax structure in textiles, petroleum and telecom sectors by abolishing multiplicity of taxes and duties.The
government has already hinted at simplifying the tax structure in these sectors.
The chambers of Industries and businesses cautioned the government while entering into free trade agreements and some of them suggested a roadmap for phased import duty cuts in order to prepare the Indian industry to face the competition.
The finance minister, who kicked off his pre-budget discussion, also had a separate meeting with agriculture sector experts who suggested agriculture exports be exempted from value-added tax to avoid delay in duty refund.
A suggestion was made that it would be desirable to rope in more farmers in oilseed and pulse segments of agriculture sector in view of the bigdemand in the country.
Representatives of tobacco growers wanted the finance minister not to hike the current duty structure on cigarette industry as high dose of domestic duty had led to "uncontrolled and increasing inflowofcontrabandcigarettesfrom across theborder."