NEW DELHI (Commodity Online): India Government may not yield to widespread demand to rollback excise and customs duty on petroleum products including 18% Minimum Alternative Tax (MAT) in the Union Budget proposals for 2010-11 as it is not inflationary. The food inflation experienced in the past few months is due to supply side bottlenecks and not due to fuel price movements.

This was indicated by Revenue Secretary, Sunil Mitra an ASSOCHAM organised post budget seminar the other day. Mitra clarified that effective corporate tax is around 22% and Finance Minister rewarded common man and industry with lot of consumption as well as savings power, no roll back could be possible on issues listed above.

Fiscal consolidation and growth would continue to be top priority of the Finance Minister for which revenue generation is one of the objectives of the Finance Ministry and through raise in excise and customs on petroleum products including crude, the government would have to generate Rs.26,000 crore in fiscal 2010-11, pointed out the Revenue Secretary. This will be possible only with no tinkering in excise and customs duties proposal announced for petroleum sector for Budget 2010-11, said Mr. Mitra.

He explained that hike in excise and customs duties would not fuel inflation in the long run and on the contrary the raise in these two duties would be absorbed because food inflation is mainly on account of supply side constraints. Mr. Mitra, however, admitted that inflation could marginally go up in the short term on account of upwardly increase in customs and excise.

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Referring to the issue of MAT, the Revenue Secretary pointed out that the government not only relaxed surcharge on corporate tax but also substantially raise income-tax rebate for common man, the impact of which would be that consumers would have greater purchasing power and would be able to save also.

Therefore, 3% raise in Minimum Alternate Tax should be taken by the industry in right spirits as it would marginally increase their tax burden, said Mr. Mitra calling upon industry not to seek it’s reduction and on the contrary helped the government move on the path of higher growth trajectory as well as ensure for it prudent fiscal consolidation policies.
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In his welcome remarks, ASSOCHAM Vice President & Member of Parliament, Rajkumar Dhoot urged the government to reconsider increase in Minimum Alternate Tax to a ceiling of 18% and urged the government to bring it down 15% since industry was anticipating that MAT would be reduced to levels of 10%. He complimented the Finance Ministry for presenting a balanced budget which would integrate a sound balance between growth on one side and consumption and savings on the other.

Speaking on the occasion, ASSOCHAM Committee Chairman on Indirect Tax, Nihal Kothari urged the government to exempt real estate sector from levy of service tax since real estate is subjected to stamp duties and therefore it faces the challenge of double taxation.

Rahul Garg, ASSOCHAM Committees on Indirect Tax Co-Chairman sought norms for reporting of agriculture income which was endorsed by Mr. D S Rawat, Secretary General ASSOCHAM who also spoke on the occasion.

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