Indian industry seeks liberal tax regime for project exports
Monday, 11 November 2002, 20:30 IST   |    3 Comments
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NEW DELHI: A leading Indian industry body has sought liberal tax regime for project exports. In a memorandum to the finance and commerce ministries, the Associated Chambers of Commerce and Industry of India (Assocham) said joint ventures (JV) were an important vehicle for companies to pool their manpower, materials and equipment resources and share risks in execution of construction projects overseas. "These JVs are most often unincorporated, project specific entities pooling expertise and resources for a particular project," Assocham said in a statement. "The Income Tax Act 1961 treats such JVs as an Association of Persons (AOP), for the purposes of taxation. This poses problems, in the case of profit sharing JVs, as tax has to be paid by JV as an AOP. "As a result, the company cannot set off losses of a JV against profits of the parent company, or profits of the JV against losses of the parent company." The memorandum coincides with the finance ministry inviting inputs from the industry as part of the tax reform measures and the start of the Indian annual budget making exercise. Assocham said that double taxation of distributed profits or exemption on dividend income from foreign companies also needed to be examined. Though the government had provided a tax holiday for investments in infrastructure, Assocham said the provisions were diluted by the tax on distributed profits and minimum alternative tax (MAT). This brings project export and consultancy firms under the tax net. In the case of cross border leasing and hiring of equipment, Assocham pointed out these were also subject to import duty. There was no logic for this import duty as "the lessee does not own the equipment during use as it is a case of temporary imports", Assocham said. In addition, the lesser had to pay 10 percent withholding tax. "The construction sector in India needs to be enabled to increasingly utilize leased equipment to the maximum. This would also facilitate the work of World Bank/Asian Development Bank projects undertaken in India," it stated. It has sought removal of tax discrimination between product and project exporters, hike in deduction on income from royalties and patents, rationalization of tax treatment for JVs and exemption from customs duty for used equipment brought into India.
Source: IANS
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