Exempt infra from excise, VAT/CST: Assocham
The Associated Chambers of Commerce and Industry of India (Assocham) has urged the Finance Minister to exempt infrastructural projects from levy of Excise, Value Added Tax (VAT) and Central Sales Tax (CST) until such projects are commissioned. Assocham argues that due to these taxes, the capital costs of such projects become dearer by over 20-25% which put huge burden on those that are responsible for commissioning infrastructural projects.
In its pre-budget wish list on the infrastructure sector, submitted by Assocham president, Sajjan Jindal, it has also been pointed out that the incidence of 10% service tax imposed on such projects during their implementation phase needs to be discontinued since infrastructure is a priority area for the government.
According to Assocham, burden of service tax, excise, VAT and CST on all infrastructural projects question their bankability as developers do not get easy access to liquidity as a result delay occurs in their commissioning.
Jindal has further stated that interest exemptions for infrastructure bonds or the like should be considered, alongwith incentives for making such investments (such as, an additional deduction of Rs. 1 lakh under section 80C) by making it total at Rs 2 Lakh.
In the past, there have been instances where such incentives have been provided such as India Development Bonds. Assocham has further suggested that the infrastructure facility should be defined under the service tax provisions and service tax exemption also be extended to infrastructure facilities such as power, port, water sewerage projects, irrigation projects, waste treatment plants, water treatment plants and drainage systems.
It has also recommended that definition of Section 80 1A of Income Tax Act should be revised so as to provide a fillip to government’s Bharat Nirman Programme towards upgrading rural infrastructure covering roads, irrigation, drinking water, electricity, housing and telecom. Presently the definition of infrastructure facilities is restricted only to road, bridge or rail; highway projects; water projects and ports and airports.
The definition of rural infrastructure facility should comprise village kiosks housing IT infrastructure, support infrastructure like solar-panels, UPS/batteries, water harvesting facilities such as check dams, wells, ponds, rain harvesting structures and cold storages, freezing chambers & cold chain transportation system.
Assocham has also suggested that excise duty on construction equipment (all goods falling under Tariff Heading Nos. 84.26, 84.27, 84.28, 84.29 & 84.30) be reduced from 8% to 4%. At present, excise duty on earthmoving and construction equipment has resulted into cost escalation for infrastructure projects like dams, highways, flyovers, mining ad irrigation.
It has further sought extension of 10 years tax holiday for the cold chain establishments in respect of the profits of the undertaking and the assessee given the option to claim this tax holiday for any 10 consecutive years out of 15 years beginning with the year in which undertaking commences businesses or commercial operations.
Infrastructure would require substantial investment by public sector where the gestation period of a project is much longer such as roads and rural infrastructure or where private sector investment is unlikely at this stage like irrigation projects. Significant financial resources can be mobilized by the government for such investment in public sector infrastructure projects or in industrial projects though partial dis-investment of shares in the existing public sector companies, without losing their management control.