Mahesh Kodumudi: Tax reforms will encourage, deepen manufacturing
Jul 11 2014
The announcement of continuation of the excise duty cut, much before the presentation of budget, was a precursor to the government’s intention to stimulate the automotive industry.
The increased automotive sales over the last two months are testimony to the confidence restored in the consumer’s mind. Additionally, the budget has provided more disposable income in the hands of people by increasing the income tax threshold and through other measures for increasing savings.
Coming specifically to the automotive industry, we heard a positive statement made by the finance minister on enabling a decision on goods and services tax (GST). A structured tax reform like GST will give the market the necessary boost for sustained growth and a definite increase in consumption.
Apart from making the countrywide trade easier and transparent, GST would also improve efficiency, and ultimately lead to cost savings for the industry as a whole. No doubt, the end consumer will derive strong benefits out of this. Though there is no clear roadmap defined yet on GST implementation, we hope and believe it will be put in place within this financial year.
The amendment to excise duty valuation rules reinforces transaction value that was previously diluted by the Supreme Court judgment. This was a long pending demand, which has finally been met.
Changes in transfer pricing like introduction of advance pricing agreement (APA) rollback provisions, range concept for arm’s length price and use of multiple year data allowed for benchmarking will pave the way to tax certainties in the longer run. This, along with the investment allowance of 15 per cent, is a positive move for the industry to invest further.
All these will boost the investor confidence and help them plan long-term strategies.
The emphasis on infrastructure development and improvement in roads, ports, railways and power will reduce the cost of doing business, improve the industry’s competitiveness and boost exports.
Trade facilitation measures like faster clearance of cargo and single-window scheme are positive steps in the right direction, as these will make import, export-related activities easier.
Overall, the budget paves the way for many short and long-term reforms that will encourage and deepen manufacturing activities in the country.
It gives us immense pleasure that the new government is looking at the industry as an essential partner in economic progress and national development.