The Hindu Business Line : Infrastructure sector

Players in the infrastructure sector, especially private construction groups, hope the Budget will remove the surcharge on corporate tax and cut tax rates. — Paul Noronha

FOREIGN entrepreneurs who have invested in India's highways and port sector on the comfort of a slew of tax holidays are waiting anxiously for the Union Budget for 2003-2004 to be unveiled by the Finance Minister, Mr Jaswant Singh on February 28.

Will Mr Singh bite the bullet and announce the implementation of the Kelkar Committee recommendation to abolish tax holidays granted to investments in infrastructure sectors, they wonder.

"Foreign investors who make investment decisions need to know the Government's policy on the continuation of these incentives as they have an impact on long gestation projects as in the infrastructure sector," a top official with P&O Ports, which operates container terminals at JNPT and Chennai Ports, said.

According to him, the Finance Minister needs to set out a clear roadmap on how the Government intends to implement the Kelkar Committee report.

"This is important since the Kelkar report has recommended the removal of various tax incentives," he opined.

Private investors in the port sector have also sought zero Customs duty on the import of equipment required for container handling terminals.

"Last year's Budget brought about a deduction in the Customs duty, but we would like to see further relaxation in this regard," industry sources said.

The highways sector, which has witnessed large inflow of private capital for the National Highways Development Project (NHDP) is eager to see the removal of the surcharge on corporate tax along with a lowering of the corporate tax rates.

The private sector involved in the construction of highways and ports has also pitched for a stable policy on taxation of dividends.

They feel that during the past few years, the policy on taxation of dividends has been tinkered with in many ways.

"Dividends should be made tax-free and not taxed in the hands of the recipients, nor should a distribution tax be levied on companies," the official said.

The infrastructure sector is also keen on seeing the removal of Minimum Alternate Tax (MAT) on companies that enjoy tax holiday concessions under Section 80 IA.

The domestic shipping industry is pushing for two major sops to boost its fortunes — a new tax based on the tonnage of shipping companies to replace the existing corporate tax structure and modifications to the way in which seafarers income is taxed.

There should be a level playing field for taxing seafarers, whether they work on board Indian flag vessels or on foreign ships. This would stem the exodus of Indian seafarers to foreign flag vessels.

"If Indians working on foreign flag vessels are given tax sops, the same should be extended to Indians employed on Indian flag ships," says an industry official.

Currently, Indians employed with foreign flags are entitled to tax exemptions that their counterparts on Indian flags are not privileged to have.

The shipping industry feels that a new tonnage tax and rationalisation of seafarers taxation are the two ways to resurrect their sinking fortunes.

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