CII Communique - February, 2010

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technologies, which have the potential to generate
sizeable gain for the environment. Tax deduction could be
extended to individuals undertaking such investment in
the house/property they are living in and also to builders
who invest in these technologies while constructing
green buildings.
Third, tax incentives should be given to persons investing
in companies engaged in generation of renewable
energy or other such businesses resulting in water
efficiency, carbon emission reduction, etc., that would
result in higher cash flow to these industries. The
benefits could be given by way of tax deduction or
reduced rate of capital gain on transfer of shares in
these companies; tax free bonds, which may be issued
by these companies; etc.
Fourth, to encourage the use of environment-friendly
petrol private cars with low emissions and high fuel
efficiency, a higher rate of depreciation should be offered
to buyers of such cars.
Fifth, the benefits of tax holiday under Section 80IA
of the ITA could be extended to the manufacture of
advanced energy efficient products and equipment
used in solar, wind, and other environment friendly
resources.
Sixth, water being a scarce resource, there is a need
to introduce measures to ensure its efficient use. Tax
credits may be given to encourage water users to
invest in (a) the construction of impoundments to use
available surface water, thereby reducing dependence
on ground water; (b) the conversion from ground water
use to surface water use; and (c) land leveling to reduce
agricultural irrigation water use.
Retain Key Indirect Taxes at Existing Levels
As a part of its strategy to fight the impact of the global
slowdown on the Indian economy, the government last
year decided to bring down excise duty from 14 to 8
percent, and service tax from 12 to 10 per cent. These
measures yielded significant results as reflected in
the recovery of the industrial sector in recent months.
Since the process of recovery is still far from complete,
CII has suggested
to the government
to continue with
the existing rates
of excise duty and
service tax. Further,
it has recommended
continuing with the
existing rate of peak
customs duty (at 10 percent) as well. This is necessary
to ward off the risk of a surge in imports from countries
offering special incentives to revive their domestic
industries.
Rationalize some Sector-specific
Indirect Taxes
There are numerous cases where the structure of
Customs Duty is anomalous - duty rate on furnished
products is less than the duty rate on inputs used.
CII has asked for removal of anomalies which are
present in cases of ferro-alloys, orthopedic implants,
petrochemicals and tyres. It also wishes to see Customs
Duty being reduced from 5% to nil on non-coking coal
(to help power plants, captive power plants and cement),
petroleum coke (to help cement and other industries),
scrap of copper, zinc and lead ( to encourage recycling
of these metals) and ferro-nickel (to help alloy steel
manufacturers).
As regards sectoral excise duty, CII has drawn the
attention of the government to the excise duty on carbon
black at 8%, compared to 14% on its input (carbon
black feedstock), which has resulted in accumulation
of Cenvat credit for the manufacturers of carbon black.
A case has thus been made for the reduction of excise
duty on carbon black feedstock from a level of 14 to
8 percent. Similarly, keeping in view the forward and
backward linkages associated with the automobile
industry, the memorandum has asked for reduction of
excise duty from 20% to 8% on multi-utility vehicles
and withdrawal of specific excise duty of Rs. 10,000
on passenger cars other than small cars.
On service tax, CII wants encouragement to be given
to construction activities related to all infrastructure
projects by way of exemption of service tax. These
projects may relate to sectors such as power, sewerage
and irrigation, waste treatment plants, water treatment
plants, drainage systems etc.
The need for reduction in VAT has been indicated for
the natural gas sector. An environmentally preferred
source of energy, natural gas, at present, attracts a VAT
of 12.5% to 14% in a
majority of the states.
CII has recommended
TAXES inclusion of natural gas
in the list of ‘declared
goods’ under Central
Sales Tax Act to ensure
its reduction to a level
of 4%.
10 | February 2010 Communiqué