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Ahead of the Union Budget 2024-25, the trade and industry bodies on Tuesday urged finance minister Nirmala Sitharaman to provide tax deductions and investment to boost research and development (R&D), simplify the transfer pricing regime, and tweak customs duty on certain products.
During the pre-budget meeting with the finance minister and top officials from the finance ministry in the North Block, exporters called for the continuation of the export-boosting scheme–interest equalisation, higher budgetary allocation for the Market Access Initiative scheme, and steps to boost exports in the gems and jewellery sector, which has been dwindling over the last year.
The meeting with the finance minister comes at a time when the Indian IT industry is witnessing a continued slowdown because of global macroeconomic uncertainty. Merchandise exports are also slowing due to geopolitical tensions.
IT industry lobby group Nasscom has asked for strengthening India’s tax competitiveness in transfer pricing, which generally deals with transactions between companies and their subsidiaries.
The body suggested increasing the threshold of international transactions of companies to make them eligible for safe harbour rules. Currently, those with up to Rs 200 crore of international transactions are eligible for safe harbour rules. This should be raised to Rs 2000 crore.
The industry body also hoped for a reduction in the applicable margin rates under safe harbour in line with global trends. Currently, the applicable margins in India under safe harbour for IT-enabled services are 17-18 per cent, whereas globally these rates fall around 5 per cent.
The Federation of Indian Export Organisations (FIEO), the apex body for exporters, urged the finance minister to extend the interest equalisation scheme for five years. The scheme is valid till June 30. Under the scheme, banks provide loans to exporters at a lower interest rate, and the lenders are thereafter compensated by the government.
“Given the rise in interest rates consequent to an increase in the repo rate from 4.4 per cent to 6.5 per cent in the last two years, the subvention rates may be restored back from 3 per cent to 5 per cent for manufacturers in MSMEs and from 2 per cent to 3 per cent for all in respect of 410 tariff lines.”
Since globally R&D is incentivised, FIEO also urged the government to boost the same to sustain exports. “35 out of 38 OECD countries provide either lower tax or higher deduction on R&D expenditure,” it said.
The Gem and Jewellery Export Promotion Council called for duty drawback on exports of jewellery, ‘safe harbour’ rules in special notified zones, and the abolition of equalisation levy for rough diamonds to boost the sector’s exports, which saw a 30 per cent year-on-year contraction in the financial year 2023-24.
Ajay Sardana, president and head of strategy and business development at Reliance Polyester, said that the customs duty for petrochemicals should be doubled to 5 per cent to stop the dumping of these products from China.
The meeting was attended by trade and industry bodies, including Wipro Ltd, heads of state Chambers of Commerce from Tamil Nadu, Kolkata, Gujarat, Nasscom, the Federation of Hotel and Restaurant Associations of India, the National Restaurant Association, export promotion councils such as FIEO, and the Gem and Jewellery Export Promotion Council, among others.
First Published: Jun 25 2024 | 3:01 PM IST
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