Financial Daily from THE HINDU group of publications
Friday, Mar 18, 2005
Industry & Economy - Taxation
Chidambaram promises `good news' on cash withdrawal tax
New Delhi , March 17
THE Finance Minister, Mr P. Chidambaram, on Thursday hinted at a softening of the Budget proposal to impose 0.1 per cent tax on bank cash withdrawals of Rs 10,000 and more in a single day.
"The tax (Banking Cash Transaction Tax) is not being imposed. It is being proposed. I assure you that there would be some good news on this," he said in his reply to the debate on the Budget in the Lok Sabha.
The Minister, however, refused to get drawn into the specifics of amendments to the tax proposal and said details would be provided during the debate on the Finance Bill.
Following reluctance on the part of some States to adopt the proposed value-added tax (VAT) regime, Mr Chidambaram made a fervent appeal to State Governments not to backtrack on their commitment at this late stage. "Please honour the promises that your Chief Ministers and your Finance Ministers have made. Please implement VAT. It would make the Indian tax system more modern and efficient," he said.
The VAT regime is scheduled to come into effect from April 1.
Reeling out figures on the growth in investment activity after the UPA Government took office last year, Mr Chidambaram said if the momentum continues, the coming fiscal might see a 7-per cent growth. "There has been a sharp spurt in investment after many, many years. We are on a rising curve of investment. If this continues, 2005-06 promises to be another good year, and the UPA Government would deliver another year of growth of over 7 per cent," he said.
Mr Chidambaram also said the Government proposed to initiate measures that would lead public sector banks to further reduce their lending rates, especially to the farm section. "I intend to take measures that would lead to a further reduction of lending rates of public sector banks," he said, while urging states to take matching steps to help the co-operative credit institutions also lower their lending rates to farmers.
He also said the management of co-operatives should be made professional and depoliticised. "The entire co-operative credit structure is in ashambles. We can revive and save the co-operative institutions. States must take measures to improve the management of the co-operative credit structure, so that their lending to farmers is at a more acceptable level," he said.
Making a strong plea to the state governments to come on board with the Centre to make development programmes workable, Mr Chidambaram said since implementation of a large numbers of programmes rests with the states, they must improve their standards of governance.
"States must improve their governance standards. They must spend the funds given to them on the programmes that they are meant for and not divert it to something else," he said, pointing out at rampant diversion of funds by the states.
Replying to a query on the extent of recovery of arrears of taxes, Mr Chidambaram said: "We have recovered more arrears than any year before."
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