With the Union Budget around the corner, the industry is not very happy with the proposals regarding minimum alternate tax (MAT). Neither is it in favour of reports that Budget 2013 could see the revival of inheritance tax nor the delay in implementing goods and service tax.
In an interview to CNBC-TV18, Adi Godrej, president, CII and Sunil Munjal, joint managing director, Hero MotoCorp to find out what India Inc expects from Budget 2013
Below is the edited transcript of Godrej and Munjal’s interview to CNBC-TV18.
Q: What is your expectation from this year Budget?
Godrej: The finance minister needs to concentrate on growth orientation in the Budget. Anything that helps growth would be welcome. We should be very careful also to make sure that there is nothing in the Budget speech or in the Budget proposals that creates any kind of negative perception as the Budget last year did. It is very important to ensure that the perception both outside the country and within the country is positive. The reform agenda already laid out has been good. More of that should come both in the Budget speech and in the Budget. Anything he does in the Budget, any proposal should be oriented towards growth. That is the best way to create a fiscal balance.
Q: You said that P Chidambaram should avoid anything this Budget like the retrospective amendment in the last Budget or general anti-avoidance rule (GAAR) in the previous Budget which could send out a negative sentiment or a negative signal to both domestic as well as foreign investors. Let’s talk about what is being currently speculated, which may perhaps be seen as negative signals. The finance minister himself is saying there is an argument for a higher tax on the super rich.
Godrej: I don't think such a tax would be sensible. Anytime we have had high rates of taxes in India, whether direct or indirect, collections have been lower. Lower rates of taxes have always lead to higher collections. Any increase in direct taxes or indirect taxes at this stage will not be good for the economy. Gross domestic product (GDP) growth would be affected. What we really need is to accelerate GDP growth and collect higher taxes through the higher growth.
Q: You do believe that we are going to perhaps see him winding down the fiscal stimulus, specially the measures that were taken post 2008. If we read between the lines of what his trusted advisor Parthasarthy Shome has suggested, that the stimulus provided post 2008 was not really efficient or there is no definitive analysis to prove that it was particularly efficient. So, do you anticipate a winding down of the fiscal stimulus that we saw post 2008?
Godrej: That fiscal stimulus has already been wound down and the excise and service tax rates today are the ones that are expected in the goods and services tax (GST). So, I don’t think that it should be increased at all further.
Q: While the future of the direct taxes code (DTC), comprehensive DTC is still with a question mark at this point in time, maybe we could see some provisions of it being introduced in this Budget. Back to that controversial, dreaded issue of minimum alternate tax (MAT) and there seems to be the thinking within the finance ministry that maybe once again they could consider bringing in MAT on gross assets as oppose to booked profits. What is your own sense?
Munjal: We have always objected to MAT as a very matter of principle itself and overtime, it has not only stayed there, but the MAT rates have gone up until they are almost set power now with regular rates being paid by companies. So, if you change it now and make it even more stringent or higher, there is no point exempting any company at all. You may as well have the same tax regardless of what you do.