Sir
The government needs revenue today than ever before. Its exchequer is drained. For spending to be sustained it is desirable to roll back the cuts in excise duty and service tax announced earlier by Mr. Pranab Mukherjee, just before the Lok Sabha elections. FBT (Fringe benefit tax) must stay – no reason why luxuries are to be exempt from taxes, just because they serve business interests.
Next, for some more revenue streams. The Indian freight sector is a Rs. 80000 crore market.
Taxes in surface transport sector, currently, are being borne by Transport companies and Logistics service providers (3PL), who pass on the burden to their clients. There are middlemen and brokers in the value chain – especially in road transport – who make a huge income (more than 3PL) yet evade the tax net, tacitly. It is a pity that truckers (who invest money on purchasing trucks) are subject to taxes – TDS and service tax – and earn too little on their investments, sometimes finding it difficult even to pay their monthly EMI (Equated monthly installment), akin to transport companies.
Road transport sector of India is highly fragmented and dominated by wholesalers, middlemen and brokers (also called as commission agents).
Two types of agents are there – godown agent and truck agent. Both earn sizeable income on the services.
The godown agent is the wholesaler and the truck agent (broker) is the person who liaises between the trucker (Truck owner) and the wholesaler for moving his materials.
This segment – wholesalers and truck brokers – is blissfully away from the tax net, yet making huge profits.
There are big wholesalers who are registered and pay taxes, but only a few. Most of the wholesalers are not registered, and hence none in the government revenue department knows who is augmenting material (especially farm produce other than rice, wheat and pulses). To the extent people in revenue department do not know him, the wholesaler feels safe. So is the truck broker – he simply has a 10 by 10 room with a telephone line. There is not even a proper signboard for his outlet (stray names like xyz transports / roadways / roadlines), mostly situated in the outskirts of cities and in transport nagars. A small problem, the truck broker can simply close his shop and feign ignorance.
The cut that a wholesaler earns is sizeable, as everyone knows. That the truck broker earns is approximately 6 percent of the transport cost from his place to the destination. That is, if he organizes a truck to a wholesaler in Bangalore (where the truck broker will, of course, sit) to move 16 tonnes of his material to a place like Lucknow, the freight rate easily will cross Rs. 1 lakh. 6 percent on this is quite huge, which goes unnoticed ! And, imagine the profit that a broker can make on a route like Cochin to Guwahati.
Mr. P Chidambaram tried to bring in commission agents under the tax net earlier. But, diligent implementation is key to bring in the truck brokers, who earn quite a lot without getting noticed. Implementation of taxes and collecting the same from people in the freight sector is not being done on a scale that is appreciable.
Taxes on telecom services are skewed currently – with telecom operators resorting to a billing with more of that service which has a lower tax tariff. To set it right would help. Spectrum and license fee structures are also to be rationalized. Incentives for broadband penetration, similar to oil exploration are required to encourage telecom companies to be enthused about laying cables into rural areas.
IT (Information technology) and ITeS (IT enable services) offer a wide scope for employment of your youth. This segment is going through a tough phase with the US economy in doldrums. Specific incentives that would help the employers of this sector would be of immense help.
Small and medium enterprises started after 2005 have been severely hit because of many factors. Sops to help them sustain themselves are required.
We would expect Mr. Pranab Mukherjee to offer tax exemptions on savings made by senior citizens in budget 2009 to help them lead a comfortable life at the dusk of their lives.
Importantly, no loan waivers or populist moves. We would like our netas to treat loans as receivables and not as freebies.
Regards
Raghu Seshadri
28 / 11 B, Muthu Mohamed street
Madipakkam
Chennai – 600091
(Note: My photo is attached with this mail).
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