Budget needs to focus on promoting infra investment: CII
PTI January 21, 2013Industry body CII has sought urgent steps in the forthcoming Budget to make the infrastructure sector viable and capable of attracting capital.
"Given that the 12th Plan envisages an investment of $970 billion in infrastructure, nearly half of which is to come from the private sector, urgent measures are required to make the sector viable and capable of attracting capital," CII said in its Pre-Budget Memorandum submitted to the Finance Ministry.
Among the key measures suggested to provide a fillip to investment in the sector, CII has asked for exempting infrastructure companies from the payment of Minimum Alternative Tax (MAT).
Currently, infrastructure projects are entitled for a tax holiday under section 80IA for 10 consecutive years during the first 15/20 years of their operation. "The levy of Minimum Alternative Tax (MAT) during this period has greatly negated the tax benefit offered under 80IA," said CII.
The memorandum has also drawn attention to the need for continuation of tax benefit for power sector under section 80IA sunset clause, which entitles a company for tax benefits, only if it starts generating power by the end of current fiscal year.
"With a view to attract large investment in power generation, which is critical for growth, CII has made a case for extending the sunset clause under Section 80IA till the end of the 12th five year plan period," CII said.
In order to reduce the construction and operation cost of projects, it said, it is in favour of restoration of section 10(23G).
By exempting the interest income of the financial institutions received from the Rupee term loan financed to the companies eligible for claiming deduction under section 80IA(4), this will greatly help in countering the high interest rate environment for the infra companies, it added.
Further, given the rapidly growing demand for housing from the low middle income population, it is critical to promote low cost housing.
Currently, the government offers interest subvention of one per cent for low-cost housing loans up to Rs 15 lakh, provided the housing cost does not exceed Rs 25 lakh.
"CII recommends that interest subvention scheme is extended to total housing cost of up to Rs 35 lakh. This sector has one of the largest multiplier effects and so, an incentive for investments in low cost housing would create demand in over 200 industry sub-sectors," the statement said.
"The tax benefits under 10(23G) will not only help in fighting the slowdown but will also rein in the sharp increase in dwelling prices that we have witnessed in the last few years," suggested DG, CII, Chandrajit Banerjee.