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PC hits some, misses some, but stays afloat
By Harish Rao
P. Chidambaram's budget has evoked a mixed response from those engaged in infrastructure. According to some people, there are sufficient signals in the budget to indicate that government is committed to removing the inadequacies in the infrastructure sector through a mix of policy and fiscal measures.
"The budget recognises that the key to growth is investment - public and private, domestic and foreign," says Tantra Narayan Thakur, Chairman and Managing Director, Power Trading Corporation of India Ltd. He says that the announcement of the formation of an Inter-Institutional Group (IIG) by IDBI, IDFC, ICICI Bank, SBI, LIC, Bank of Baroda and Punjab National Bank is a welcome step, as it will provide the much-needed finance for implementation of power projects. The banks, through IIG, will pool their resources on a callable basis and a sum of Rs 40,000 crore will be made available as and when necessary.
Not everyone is happy. There are people who are complaining that the budget has not given adequate weightage to ports, roads and railways.
The shipping industry has got what it demanded, though. Agrees Vishal Kalantri, Director, Dighi Port Ltd, "The introduction of Tonnage Tax on shipping companies and the setting up of a Rs 40,000 crore fund are some of the exceptional features of the Union Budget 2004-05." Kalantri is, however, sore over the proposal to increase Service Tax from 8 per cent to 10 per cent, as it would raise the burden on new minor ports and airports. "It would be advisable if a 10-year tax holiday currently applicable to special economic zones is extended to new ports and airports, which are very capital intensive," he adds.
Service Tax is the bone of contention for many in the construction industry. As K. Subrahmanian, Managing Director, Afcons Infrastructure Ltd, says, "The (service tax) exemption should include ports, jetties, wharfs, pile foundation for power projects, sewerage pipeline and outfalls, and other infrastructure projects of a similar nature."
According to Subrahmanian, there is a lack of clarity as to the calculation of Service Tax. "Construction costs include material and service components. Therefore, should Service Tax be calculated only on the service components since we are already paying Works Contract Tax on material component?" he asks. Subrahmanian has another valid point to make: "Excisable goods gets the benefit of CENVAT for input excise duty and Service Tax paid.
Similarly, the construction industry should also get the benefit of set of excise duty and Service Tax on input cost against the Service Tax liability."
PC hits some, misses some, but stays afloat
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