Financial Daily from THE HINDU group of publications
Sunday, Mar 06, 2005
Corporate - Taxation
Chidambaram allays fears over new depreciation rates
New Delhi , March 5
THE Finance Minister, Mr P. Chidambaram, has rejected industry's demand for a re-look at the proposed depreciation rates, stating that the new rates would not be to its detriment.
"There is nothing to fear about depreciation. We are satisfied that internal accruals under the old and the new regime would be the same at the end of five years," Mr Chidambaram said at a post-Budget meeting organised by Assocham here on Saturday.
Mr Chidambaram also held that the internal accruals at the end of five years under the new dispensation would be equivalent to the replacement cost of machinery. He said that industries that are on an expansion mode would only stand to gain, given that the initial depreciation had been now pegged at 20 per cent.
The Finance Minister was responding to the observations made by Assocham's past President , Mr Hari Shankar Singhania, that the new depreciation rates would adversely impact internal accruals of capital-intensive industries and that it would be appropriate to restore the earlier rates.
`Identify investment goals'
Mr Chidambaram also urged the captains of industry to identify investment goals and bring all obstacles to such investment to the attention of the Investment Commission headed by industrialist Mr Ratan Tata. He said that the Commission had already completed discussions with the gems and jewellery and apparel sectors.
The Finance Minister also asked the industry to come forward and identify sectors and location for taking forward the cluster approach, which had so far taken off only in a small way in the textile sector.
Further, Mr Chidambaram also said that all Ministries would, in the next four weeks, undertake an exercise to convert every financial outlay into outcomes. "This means that the Government would not be satisfied with financial expenditure alone. Each Ministry must convert every financial outlay into physical outcome. This would help in the identification of necessary inputs and therefore the areas where growth could be generated," Mr Chidambaram said. He invited the industry to convert such outcomes into goods and services that are required to achieve growth.
I-T law clean-up
Promising a stable tax and policy environment in the coming years, Mr Chidambaram said that the Government would come up with a brand new Income-Tax Bill by December-end or early January next year. "There is far too much clutter in the current income-tax law. Even a man with an average intelligence would find it difficult to understand the provisions. We must clean it up," Mr Chidambaram said.
While the move to replace the income-tax law with a new law was a long-term goal, the Finance Minister highlighted that his short-term goal was to introduce an amendment Bill (for both indirect and indirect taxes) to clean up a number of non-revenue provisions. "I hope to get this Bill passed by April or May this year. We also intend to have consultations with industry associations before the Bill is introduced," he said.
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