NEW DELHI: The government-appointed committee, which submitted its report to Finance Minister Jaswant Singh here Friday, also recommended changes in import duty rates on a range of products. "Since 1991, our fiscal policy has substantially reduced the corporate tax rate from 51.75 percent in 1991-92 to 36.75 percent in 2002-03 and now proposed to be further reduced to 30 percent in 2003-04," said the report. The panel, headed by Vijay Kelkar, adviser to the finance minister, also recommended the lowering of corporate tax for foreign companies to 35 percent from existing 36.75 percent. Similarly, the maximum income tax rate, which has also been substantially reduced from 56 percent to 31.5 percent in 2002-03, is now proposed to be further reduced to 30 percent in 2003-04. The panel has also recommended that there should only be a two-tier structure for personal income tax instead of the current three. It said incomes between 100,000 and 400,000 should be taxed at 20 percent and those above 400,000 at 30 percent. Setting the roadmap for simplification of indirect taxes, the panel proposed that zero, 10 and 20 percent customs duty slabs in the next two years should be modified to five, eight and 10 percent levels by 2006-07. The three customs duty slabs will include zero percent duty for life savings drugs and 10 percent for raw materials and intermediate goods within two years, the panel said. It urged the government to give interest subsidy of two percent for housing loans up to 500,000 to all borrowers covering about 85 percent of the total borrowers and all borrowers from low income groups. "The task force accepts the view that the housing sector is one of the key sectors of the Indian economy in terms of providing growth and employment and it is indeed a leading sector," the report said. "In order to protect low-income groups, we suggest an interest subsidy of two percent for housing loans up to 500,000 to all borrowers. This will help prospective homebuilders whose income is less than 100,000," it added. For small-scale industries, it recommended cleansing of the duty structure and steps to minimise harassment and to provide that no arrests can be made without magisterial approval. The panel also recommended complete automation and introduction of IT in customs and excise departments by January 1, 2004, in a bid to reduce transaction cost and simplify procedures. Other major recommendations of the panel include removal of long-term capital gains tax on shares of listed companies, dismantling the dividend tax and doubling the tax exemption limit on personal incomes to 100,000. "One of the important objectives of our proposals is to increase the tax revenue-to-GDP (gross domestic product) ratio through better compliance and a larger tax base," the panel said. "As a consequence, additional resources will become available to the state, which can be used to increase expenditures for producing public goods, particularly in the areas of health, education and other social infrastructure." The report said that the tax reforms proposals should be seen as "an integral part of the second generation of reforms," aimed to accelerate the growth rate while meeting the challenges of globalisation.
Source: IANS