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Follow UsBANGALORE, INDIA: “Overall last year it’s been good for the industry as far as industrial growth is concerned but not good for them in terms of taxes. The biggest challenge for India right now is high level of indirect taxes,” says TV Mohandas Pai, member of the board, Infosys.
“If you are an exporter you save 30 per cent on the goods that you buy because they don’t pay excise duty and custom duty and VAT. Indirect taxes have to be reduced so cost of good comes down, and people can buy more goods. We need mass production. There are billion people in the country and we need to lower indirect tax. That is number one priority,” he adds.
Talking about India moving toward investment-oriented economy; Pai says that 65 per cent economic growth comes from consumption and 35 per cent from investment.
“We are already in investment phase. All segments of the industry are investing, be it steel, cement and there is lot of economic activity and it will continue.”
“But for the economic activity to continue the price should be less. Apartment prices are going up and there is no money to buy. That is why indirect tax should be reduced and slabs be increased so the people have more money and the growth can come,” he said.
"I have three expectations from this budget on tax policy:
First, excise duty should come down from 16 per cent to 12 per cent.
Second tax slab for direct tax for individuals should go up to 30 per cent above four lakhs. Right now it is 30 per cent above 2.5 lakhs.
Third, I expect surcharge and corporate tax to go away.
About the STPI scheme he says, “Like all companies we have joined Nasscom to represent STPI and told the government to have SEZ scheme under which one can go to SEZ and get tax holiday for incremental business.”
“The SEZ is good for large companies and not good for small ones. Because small companies cannot locate to far areas, as transportation charges are involved and cannot hire people."
"In all the SEZ rents are high. It discriminates the smaller companies, and whole industry is built on the back of smaller companies. So we asked the government to create special scheme for smaller companies.”
Further, this is very important industry in India, which has created 430000 jobs for young Indians.
In Philippine there is five-year tax holiday per location like STPI. China has three years tax holiday. India should not lose out on it.
Tax benefit is not very high. Last year the tax benefit was $1.2 billion and this year the tax benefit for the companies might be $1.3 billion because of rupee appreciation and what they get in the form of taxes from the salaries we pay our employees is above that.
This year they might get $1.5 billion in taxes. So on one hand you give benefit to the corporation and on the other they get back equal amount of tax because you create employment and the employee pays taxes and ultimately it come out of the business, he adds.
“So I think it is very important industry for India and policy makers need to be very cautious when they look at the issue,” Pai says.
However, he says that key challenge is employment and it is number one priority for India as a country. This is the only industry that hires in large number.
“I want to stress that this scheme of tax benefit in 60 years of independence has been the most effective scheme that has created tremendous benefits for India. First, it has created two million jobs and second, very large educated middle class has got jobs, third, better purchasing power and four, world has recognized India,” he said.
“So much of technology innovation is coming to India and employees are getting trained. The industry is spending $1.5 billion every year on education and training of workforce. IT industry has raised aspiration of large number of people. Every time oil price went up we borrowed money form IMF, but now we have $ 280 billion of reserves, this is largely because of software,” he said.