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Budget 2011: City hoping for fiscal stability, tax reforms

With Finance Minister Pranab Mukherjee all set to announce the budget for fiscal 2011-12 on Monday, the city’s industry as well as residents are waiting for him to pull some rabbits out of the hat. Manav Mander speaks to city residents and captains of industry to provide a glimpse of the wishlist of various sectors of the economy as well as that of the common man

Textile industry

  • Expansion of technology and an upgrade fund for the benefit of a larger number of players in the sector
  • Routing funds under the rural employment guarantee scheme via the sector to provide gainful training & employment to unskilled labourers in rural areas
  • Continuation of existing cap of 720 million kg on cotton yarn exports till the next cotton season
  • Rollback of import duty on cotton yarn
  • Freeze on the sudden spurt in cotton & cotton yarn prices during past two months
  • Withdrawal of import duty on cotton yarn along with realistic drawback rates for the garment sector
  • Special incentive package to achieve $11 bn export target for fiscal 2011-12 and a 10% growth thereafter


  • Extension of tax holiday for special economic zones & and export oriented units, at least up to 2012-13, to enable them to tide over the current slowdown in global trade arising from the subprime crisis in the US and its impact on other countries
  • Low-cost funding through domestic & foreign currency loans. Exporters have proposed loans at a fixed rate of 6% in place of the present system of 2% interest rate subvention on the benchmark prime lending rates of banks
  • Low-cost loans to be made available to exporters’ counterparts across all sectors, considering such soft loans are available to exporters in other Asian countries, including China
  • Simplification of taxes by taxing turnover instead of all various taxes now in vogue. Reduction of overall corporate tax rate to 25%

Auto industry

  • Setting up fund for technology upgrade
  • Customs duties to remain at current level and no rollback of excise
  • No drastic changes in tax rates. Interest rates are anyway going up with rising inflation. So any added challenge will only prove detrimental to industrial growth
  • Customs duties on commodities such as steel & aluminum should not be raised as it will put pressure on pricing of automobiles in general and motorcycles/scooters in particular
  • Focus on ecofriendly vehicles as companies are eagerly awaiting major incentives for alternative fuel vehicles, such as CNG, LPG and electric, to boost their sales. Industry wants reduction in import taxes on batteries and lowering of excise duties for localised components


  • Existing rules limit voting rights of foreign entities to 10% irrespective of their proportion in the stake. The banking industry expects the government to remove this clause as a part of broader banking regulation amendment bill & let foreign entities have voting power in proportion to their stake
  • There is a feeling among bankers that the government’s spending is not enough to ease the liquidity situation and hence the scale of its spending must be increased
  • Banks are not as competitive as their international counterparts. More support should be given to banks in terms of capital. This will make them competitive with international banks in operation as well as reach
  • The operational cost in rural areas is high with respect to the revenues because of low value deposits.

Common man

  • Parity on the definition of a senior citizen
  • Double taxation on employee stock options
  • Deductions for interest payment on home loan not enough
  • Bank fixed deposits not viable for those in the high tax bracket
  • Less rebate on expenditure towards healthcare

Industry Wishlist


  • Three-tier customs duty structure: There should be a three-tier customs duty structure; 0 per cent for essentials, 5 per cent for raw materials and 10 per cent for the others. Peak rate should be maintained at 10 per cent.
  • Transference copies of customs authorities: The AR-4 form, duly certified by the customs authorities at ICD/CFS at the time of export should be treated valid for all purposes and taken as final proof of export instead of waiting for the transference copies from the port of shipment. The bank realisation certificate or the “shipped on bond” certificate from the shipping lines could also be accepted.
  • Risk of exporter: An exporter faces the risk of rejection of exported goods leading to the non-payment of export proceeds. If an exporter has taken duty drawback, he is called upon to pay back the same along with an interest of 24 per cent per annum to the department. The interest charged by the department is exorbitant while the non-payment may be on account of reasons beyond human control.
  • CENVAT certificate and duty drawback claims: Some items are exempted from central excise duty. The question of furnishing non-availment of CENVAT certificate does not arise in respect of such items. However, the certificate is mandatory for claiming the duty drawback. In such cases, a self certificate from the exporter to this effect should be accepted.

Central Sales Tax

  • Reduction of CST rate: As declared in the previous Budget, the rate of central sales tax needs to be reduced from 2 per cent to 1 per cent.
  • Single unit at different states: Some units that expand their factories in nearby states or in other states have to take different CST numbers. In the case of income tax, a company has one PAN and the tax is paid on the combined profit of the company. Similarly, the excise exemption is permitted on the total cumulative value of clearance from all outlets of one SSI unit. So, there should be a single CST registration for a single SSI unit having multiple factories.
  • Exemptions and concessions: The GST will protect the MSE sector from the present exemptions on the central and state fronts and will remove the inter-state barriers in the movement of goods. The MSE sector also anticipates common classification of goods and services, uniform rates in all the states and simple, uniform and minimum procedures. The MSE sector is also looking forward to a meaningful dialogue with the enterprises before the implementation of the GST.


Finance and Credit

  • Interest cost: Recently, the interest rate was set at 1 per cent below the PLR for loans up to Rs 25 lakh and half-a-per cent below it for small and medium enterprises loans above Rs 25 lakh. Interest rates should rule at 2 per cent below the PLR for loans of micro and small enterprises. Banks are flooded with liquidity, but the micro and small enterprises are not getting adequate finance.
  • MSE nominee on board of directors of banks: None of the nationalised banks have a director on its board representing the MSE sector. All nationalised banks should have a director representing the MSE sector.
  • Corporate sub-limit for micro/small units: The corporates have a sub-limit under the over-all limit for payments against SSI supplies. But there is no check to know if the corporates adhere to the sub-limit. A mechanism should be worked out by the RBI to monitor if the corporates adhere to the sub-limit meant for the SSIs.
  • Base rate regime: It is learnt that the base rate system is being implemented. The RBI should ensure that the base rate is uniform in all commercial banks.


(a) TDS coverage is very large. The assessee is not required to file TDS certificate with the returns.
(b) There are disallowances under Section 40a(1a) on account of non-payment or late payment of TDS.
(c) A major difficulty faced by a tax payer is that tax deducted at source under various sections of Chapter XVII are electronically deposited in specified banks.

Tax audit: The limit of tax audit has been fixed at Rs 60 lakh from Rs 40 lakh. The limit should be enhanced to Rs 200 lakh.

Service Tax

  • Service tax procedures: Service tax is payable by the 5th of the following month which is too early. The same needs to be extended till at least the 20th.
  • Service tax on business auxiliary services: As per the Finance Bill 2005, those in the sector engaged in machining, boring, turning, welding, drilling, grinding, painting, electroplating, powder coating, anodising, heat-treating, cutting and bending have been brought into the service tax net. The exemption limit with reference to small service providers is Rs 10 lakh. The limit should be raised to Rs 30 lakh.
  • Service tax on export services: The procedure of refund is cumbersome. Instead of refund, there can be provisions where no service tax is charged/payable on various export related services paid to clearing agents on exports and service taxes payable on freight incurred from factory to port. Service tax on commission payable to overseas agents on export sales should be withdrawn.

Indirect Taxes (Central Excise)

  • Central excise exemption limit: The Small Scale Industry sector has been given central excise exemption limit of Rs 1.5 crore. Keeping in view the skyrocketing prices of raw materials and allied services, the limit needs to be increased to Rs 3 crore.
  • Insufficient storage space: Rule 8 of Cenvat Credit Rules 2004 talks about granting permission to store goods outside a factory in case of insufficient place on the premises. A simple intimation should be sufficient along with submission of the ground plan of a godown and maintenance of proper challans for movement and storing goods outside the factory premises.
  • Removal of inputs for home consumption: The rate of duty for clearing inputs for home consumption should be the same as prevailing at the time of availability of credit.
  • Removal of capital goods: Excise duty payable should be on the depreciated value of machineries on the date of clearance.

Direct Taxes

Refunds: Refunds of taxes are not received by the assesses as per the time limit. In many cases, the refunds are delayed by over a year. Refund orders are prepared, but reach assesses after two-three months and in many cases, after it is time barred. Refund cases should be cleared within six months of the filing of IT returns.



Industry demands withdrawal of taxes on major products

People from different walks of life in the city have great expectations from the Financial Budget. Withdrawal of taxes/duties on major products remain the main demand of the business community here. Besides, industrialists want the Income Tax exemption raised

PD Sharma Due to the rise in price of crude oil, Indian oil companies are increasing the price of furnace oil out of proportion. The furnace oil is the by-product of petrol and diesel. The companies are making up the losses in other products by unduly increasing the price of furnace oil. All duties on furnace oil should be drastically reduced. The government is planning to increase the wages under the scheme substantially. This will further hit the industry hard. When the industry is ready to absorb labour, there is no idea what-so-ever to spend the government revenue on such schemes. 

— PD Sharma, president of Apex Chamber of Commerce and Industry

Badish JindalFiscal deficit to GDP ratio should be targeted at 5.5 per cent for financial year 2011. We see nominal GDP growth expectations for FY11 to be revised higher to 14 per cent from 12.4 per cent listed in the medium-term strategy statement. The union excise duty is increased by 2 per cent to 10 per cent and brought in line with the service tax rate to help smoothen transition to GST. We expect tax buoyancy to pick up from 0.2 in FY10 to 1.3 on recovery in growth and partial withdrawal of tax cuts.

— Badish Jindal, senior vice-president of Federation of Associations of Small Industries of India

Charan Singh LoharaCustoms duty on crude oil should be decreased and in addition to this excise duty on diesel should also be cut. All the other sectors have received packages for upgradation and development while no package has been announced for the transporters. It is learnt that the government is increasing 2 per cent excise duty on vehicles, which should not be done.

— Charan Singh Lohara, ex-president of All India Motor Transport Congress

Upkar SinghExcise duty should be decreased. MSMEs are the backbone of any country but sadly they are passing through a very crucial stage and need technology upgradation. Separate funds should be provided to this sector for the upgradation of technology and machinery.

— Upkar Singh, joint secretary, Chamber of Industrial and Commercial Undertakings

Charanjit Singh VishivkarmaOur first demand is that the Steel Price Regulatory Commission should be set up. The MSME sector has a profit margin of only 4-5 per cent, which we fail to achieve due to the sky rocketing price of steel. Overnight, prices of steel are changed, which makes it difficult for us to complete our pending orders. This is happening when China is also giving us a tough competition. Anti-dumping duty should be implemented on cycle and cycle parts.

— Charanjit Singh Vishivkarma, chairman, Federation of MSME

Vinod K. ThaparZero import duty on textile machinery should be introduced as in Bangladesh. The Technology Upgrdation Fund Scheme (TUFS) was abandoned midway. The same should to be re-introduced immediately in the original form as the policy is valid till 2012 and the industry has planned expansions accordingly. The import duty on acrylic fibre (raw material) used in hosiery and textile should be slashed and anti-dumping duty should be completely withdrawn. The income tax exemption limit should also be raised to Rs 3 lakh.

— Vinod K. Thapar, president, Knitwear Club



Residents freak as road reeks
Acid spill causes a flutter; MC digs patch
Mohit Khanna/TNS

Ludhiana, February 26
Panic gripped the Focal Point area after thick fumes, caused by a chemical reaction, rose from a patch of a road leading to the cracking of the surface and subsequent death of a stray cow on the Metro Road here today.

The incident snowballed into a major headache for the authorities as thousands of migrant workers gathered around the scene amidst rumours of volcanic activity.

The municipal corporation authorities went a step further and dug the entire patch of the road to check the cause of the “phenomenon”.

However, the rumours were put to rest after it was found that the heating and subsequent cracking of the road had been caused by the spilling of hydrochloric acid after a drum containing the chemical fell off a vehicle.

The incident happened around 6.30 am, when a drum full of the chemical being ferried on a truck fell off the vehicle. Due to the chemical reaction, the road started to melt and fumes began to emanate from the cracked surface.

In the meantime, a stray cow that was crossing the patch died after falling on the hot surface.

Sensing trouble, the police swooped into action and barricaded the area. Fearing injuries to the onlookers, the policemen shooed them away.

Soon a firetender and JCB machines of the municipal corporation arrived at the scene and started digging the patch.

The civic and police authorities sought the help of an industrialist who was equipped with an instrument to measure the temperature of the surface.

Taking a potshot at the MC, Shree Charan Shukla, a resident of Focal Point, said: “The MC authorities were in a tizzy and were seen scratching their head. The only thing that they could come out with was to dig up the road.”

Additional Deputy Commissioner of Police (ADCP-II) Sushil Kumar said the incident took place due to a chemical reaction.

Godman’s gimmick

A self-proclaimed “godman” tried to cash in on the goings-on as he squatted near the patch from where the smoke was emanating and started mumbling “mantras”. He claimed that the smoke was rising due to cosmic intervention. “I have sprinkled holy water on the earth and no smoke will now emanate from it,” claimed Gaya Prasad. But, even when smoke continued to rise, the MC officials took Gaya Prasad away.



Fumes from road
Nauseous MC digs deep for nothing
Manvinder Singh
Tribune News Service

Ludhiana, February 26
While the municipal corporation spends around 35 per cent of its budget on establishment, it still remains ill-equipped to deal with emergency situations. With no scientifically qualified person to assist them, the civic authorities ended up digging around 10 feet of road to find the cause of the fumes rising from a patch of a road here today.

The fumes, which were caused by the spilling of an acid on the Metro Road in the Focal Point locality, baffled MC officials as they explored the possibility of a “volcanic activity” behind the phenomenon.

Failing to figure out the reason behind the phenomenon, MC officials scratched their heads and finally decided to engage digging machinery of the civic body to bring out the truth.

The officers of the operation and maintenance (O&M) branch of the corporation were called in to see if the gas was coming from the sewerage.

Machines dug five feet into the road, built from the taxpayers’ money, leaving a 10-foot-wide crater.

The fire brigade was then asked to spill water to prevent any sort of heating of the ground.

This went on even as a police official, who was incidentally a science graduate, present at the scene asserted that the fumes were the result of a chemical reaction caused by the spilling of an acid on the road, sources said.

However, the MC officials relied on their heavy machinery to do the job of finding out the truth.

A senior professor of chemistry at a local college said there was no need for wasting the public money by digging a road. The matter could have been sorted out by merely conducting an analysis of the fumes by taking a sample in a jar.

However, VP Singh, superintendent engineer of the O&M branch, maintained that there was no other way out other than digging the road.



Marketeers cash in on cricket fever
Swati Goel Sharma

Ludhiana, February 26
The eagerly awaited Cricket World Cup 2011 has begun and restaurants and malls across the city are padding up, hoping to translate the fever into higher sales.

A popular coffeehouse in Sarabha Nagar is spending over Rs 35,000 on interiors and advertisements to attract customers during this mega cricket event on from February 19 till April 2. “We are installing a 42-inch LCD television within the next three days to make the game-watching experience grand,” discloses Jasvir Singh, the franchise owner. A popular restaurant chain in the same market too has additional two 32-inch LCD televisions “to allow customers enjoy the game along with good food”. Even the sprawling liquor shops in the city are setting up televisions inside, with one near Aggar Nagar, on the condition of anonymity, reporting a 15 per cent surge in liquor sales these days. According to the retail owners, while many in the city still prefer to watch the game at homes, an increasing number is now heading out for a greater experience. Rohit Sharma, a 25-year-old banker and a “big cricket enthusiast” agrees. “Watching an India match with friends at a coffee shop or a bar is far more enjoyable as the screens are bigger and there is no disturbance. Also, it is great to see fellow Ludhianvis cheer at every six or four,” he chuckles. If India reaches the final, he plans to turn the match-watching into an occasion by making prior bulk bookings at a bar.

Meanwhile, many business owners have come up with more innovative ways to enhance sales. A bakery chain for instance, has come up with a special ‘World Cup Cake’ where creamy and chocolaty players and wickets are catching people’s fancy. ‘These new cakes make up for 15 per cent of our total cake sales these days and the figure is expected to increase as India rises up the ladder,” shares Parminder Singh, the floor manager. Similarly,a prominent coffee shop in the same market has an added cricket-inspired menu.

A newly-launched bar at MBD Neopolis, on Ferozpur Road, has gone a step ahead and named dishes after Indian cricketers. ‘Sizzlers with names as ‘Bhaji’s Doosra, Raina’s Flick, Dhoni’s Helicopter Shot, Yuvraj’s Sizzling Sixes and more are selling like hot cakes,’ says Rakesh Rawat, general manager, MBD Neopolis. The bar is receiving bulk bookings for cricket matches, with as many as 40 seats already booked for March 5, he shares. Meanwhile, people are devouring everything related to cricket. The Nike store at Westend Mall (the brand is this World Cup’s official apparel sponsor) reports that the response to their World Cup T-shits has been good among the Ludhianvis with around 20 pieces selling on a daily basis.



Machine tool makers seek govt support
Anil Kumar

Ludhiana, February 26
Even though India is one of the world’s biggest manufacturer of machine tools, it still lags far behind China. Because of the latter’s higher productivity and better quality foreign companies are gradually switching to Chinese manufacturers.

About 1,200 machine tool manufacturers in Ludhiana district suffer from an absence of various types of machines required for making tools, moulds and dyes. The Ludhiana Machine Tools Association organized a large exhibition of machine tools in the city targeted at small entrepreneurs. However, the response was not satisfactory.

Kirpal Singh Sagar, president of the association, averred the government should support machine tools makers to boost their output. “Six months ago Prime Minister Manmohan Singh asked the Reserve Bank of India to finance machine tools manufacturers without any collateral. This would definitely give a boost to production in the country”, he said.

Sagar rued the acute shortage of training and design centres as well as skilled labour. “In case of big machines, there should be a common facility to provide heavy and costly machines including those for boring, grinding and gear hobbing that small entrepreneurs in the country can’t afford. The government must take steps to encourage them to take up manufacture of machine tools”.

Hurco India presented an American import machine tool manufacturing machine and Sagar Heavy Engineering introduced a country made cutting machine that is efficient in taper cutting, threading and automatic lubrication.

Mitsubishi introduced tools for cutting cellphones, automobile bodies and crankshafts. Marshall displayed a twinturn (double side tools cutting) machine) that could be operated by a single operator.



PCCTU in protest mode
Teachers go on mass leave
Tribune News Service

Ludhiana, February 26
On the call given by the Punjab and Chandigarh College Teachers' Union (PCCTU), the teachers working in non-government affiliated colleges of Ludhiana, Hoshiarpur, Moga, Muktsar and Ferozpur proceeded on mass casual leave to participate in the protest rally at Chattar Singh Park held here today.

In the rest of Punjab and Chandigarh, teachers observed “cease work” for two hours and organised campus dharnas. The rally at Ludhiana was third regional rally organised by PCCTU as per the programme chalked out by the state executive committee of the union in its meeting held on January 23. The earlier rallies were held at Amritsar on February 8 and Jalandhar on February 16.

VK Bhardwaj, vice-president, PCCTU, said that demands include inter-alia, Career Advancement Scheme (CAS) as per the UGC notification in 2006, relaxation from refresher courses as per the UGC guidelines, implementation of pension and gratuity scheme, as promised in the manifestos of the Akali and BJP parties, lifting ban on recruitments imposed in 2005, house rent allowance for teachers working in rural colleges, disbursement of regular and adequate salary grant under 95 per cent grant-in-aid scheme and inclusion of unaided colleges under the ambit of grant-in-aid scheme.

The members said that fate of many of their genuine demands were hanging in balance for more than a decade. The state government had not given benefits despite directions by the UGC. The UGC had even directed the state governments to implement schemes in its letter dated July 27, 1998.

State president Dr Jagwant said that the Akali-BJP government had not fulfilled poll promises made in their election manifesto before the state assembly elections. Both parties had promised to grant pension, gratuity and leave encashment benefits and also to lift ban on recruitments, but nothing had been done so far, said the president.



Market Committee
Cong snipes at Majithia over Kadian’s appointment
Tribune News Service

Ludhiana, February 26
The appointment of Inder Mohan Singh Kadian as chairman of the Ludhiana Market Committee by former cabinet minister Bikramjit Singh Majithia has kick-started another controversy. Kadian was appointed chairman during a special function organised at Dana Mandi on Thursday. The position of the newly appointed chairman is questionable, as the committee does not have any members as of now. That the Ludhiana Market Committee functional under the Punjab Mandi Board had been dormant for the past four years is evident from the fact that the state government has not felt the need to appoint the chairman so far.

The non-functional market committee has not only failed to redress the financial issues of the farmers but also done little towards repair of roads leading to villages.

A part of the money paid by the commission agents (arhtiyas) to the Punjab Mandi Board is allocated to the market committees to carry out development works in the rural areas. Coming down heavily on the SAD government, former Congress MLA Malkit Singh Dakha raised a question mark over the “qualification” of Majithia, adding: “He is good for nothing and qualifies in the party by being the brother- in-law of Sukhbir Singh Badal.”

Reacting to Majithia’s statement on Capt Amarinder Singh, Dakha said: “It was shameful on his part to resort to such a statement as it reflected his character and pettiness, which was an outcome of vendetta politics.” A progressive farmer from a nearby village termed the “appointment” of chairman a political gimmick to ensure the support of the agricultural community.



Water-sewerage charges
Eyeing votes, BJP councillors seek waiver
Manvinder Singh
Tribune News Service

Ludhiana, February 26
Eyeing the urban vote bank, BJP councillors led by the Senior Deputy Mayor have asked the local bodies minister to waive the interest on water and sewerage charges in spite of the fact that the government announces this at the end of the financial year annually.

Every year, the government announces a general amnesty scheme in which the residents are asked to submit their pending arrears of water supply and sewerage. During the scheme, the government does not take interest from residents on the arrears.

Though the scheme is launched at end of the financial year and is expected to come in the first week of March, BJP leaders, including councillors Sakshi Julka, Prem Lata Sharma, led by Senior Deputy Mayor Praveen Bansal and leader of BJP councillor group GS Neetu, met local bodies minister Manoranjan Kalia on the sidelines of a meeting of the state executive of the BJP here today.

During their meeting, the BJP leaders asked the minister to ensure that the waiver scheme was launched soon so that it could benefit the urban residents (voters).

The BJP leaders told the minister that the decision was crucial for them as it would help strengthen their urban vote bank.

They also told the minister that as people from the lower income group would benefit from the decision, it should be taken at the earliest.

After listening to the plea of the BJP leaders, Kalia assured them of taking the decision soon to benefit the people.

Praveen Bansal said the decision would be people friendly. He admitted that though the government announced the amnesty scheme every year, they had raised the matter with the minister as it had got delayed this year.



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