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Correct inverted duty structure, raise FDI in defence

Deepak Kapoor     February 24, 2015

Deepak Kapoor
With the Narendra Modi led-NDA government's focus on growth and inclusive development, I foresee several announcements being made in the Budget for 2015/16. However, personally, I would like to see an emphasis on the following topics.

Make in India campaign: To make Make in India successful, small and medium enterprises as also input procurement from overseas should be incentivised. This includes correction of the inverted duty structure, which results in taxation of inputs at higher rates than finished products.

For imported input and capital goods supplies, there is still a case for reduction of customs duties. This is because there is a need to set up new, competitive manufacturing facilities and foster technology transfer to accelerate the pace of indigenisation. Small and medium manufacturing businesses (doing value addition up to Rs 25 crore) should have one lump-sum tax, based on safe harbour rates.

Defence: FDI in defence can be raised to 74 per cent and the private sector can be provided with a level-playing field (through import duty exemptions) with the defence PSUs. Typically, defence PSUs and their sub-contractors are able to claim customs and excise exemptions.

Insurance: With the promulgation of an ordinance on the Insurance Amendment Bill, focus should be on the growth of the sector. It should be made a part of the 'Digital India' drive, including the financial services online platform when it is created. To deepen health insurance, an enabling framework for group health insurance for the SME sector, changing the definition of group size to include entities below 50 people, and extending the health insurance premium tax benefit for this segment will help. Tax benefits could also be extended to the sector.

Swachh Bharat Mission and Pradhan Mantri Jan Dhan Yojna (PMJDY): The Swachh Bharat campaign is gathering momentum and higher budgetary allocation and public private partnership will provide fillip to it. The Budget should emphasise on creation of adequate network under PMJDY to disseminate micro pension services through a well laid-out network of banks and microfinance institutions.

E-commerce is a sunrise industry promising high growth and employment opportunities. An announcement for FDI in B2C e-commerce and easier public listing of e-commerce companies in the Budget will provide the sector enhanced capital.

Smart Cities to be Mission Mode Programme, with the Centre providing technical assistance and guidelines for financial support to states/cities. Also, a special policy for North-East cities that would include a greater level of financial support.

(The author is Chairman, PwC India)

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