Cleared by Lok Sabha: Wider tax exemptions in textiles, more overtime in factories

The amendments to the Income Tax would pave the way for employers in the textile sector to avail tax benefits on additional employment after having worked for 150 days, rather than the 240 days of earlier.

The amendment has expanded the scope of Section 80JJAA of the Income Tax, 1961. Section 80JJAA was substituted with the Finance Act 2016 to provide that “in the case of certain assessees, in computing profits and gains derived from business, deduction would be allowed of an amount equal to 30 per cent of additional employee cost incurred in the course of such business in the previous year for the specified period, subject to the fulfilment of certain conditions”.

“Indian garments are all summer garments. We are not a great exporter of woolen garments. Therefore the nature of this trade in itself is seasonal. Therefore, if we were to cover up for this tax handicap we will have to give our companies some tax incentive to help them be competitive,” Jaitley said in his reply after the discussion.

Although they supported the bill, Opposition MPs wondered about its prospects of enhancing job creation. Left parties maintained the reduction of working days to get tax benefits would lead to an increase in home-based work, an unorganised sector. P K Biju of the CPM said this has already increased from 23.3 million (1999-2000) to 37.4 million (2011-12). The RSP’s N K Premachandran said the real beneficiaries would be businessmen, not workers.

The amendments, which need to be cleared by the Rajya Sabha, will also help unlock the value of VSNL land. Jaitley said the bill seeks to exempt assets sale by the PSU from capital gains tax. Once the bill is passed, the government will get 51 per cent of the de-merged land entity while UTI, mutual funds, banks, FIIs and ADR holders will own 29 per cent.

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At the time it was privatised, VSNL had approximately 771 acres surplus land in various cities. One of the covenants of the privatisation was that the land would be hived off into a separate entity, which it has been, and thereafter divided between the private shareholders with approximately 52 per cent coming to the government. “So, the de-merger and hiving off will take place and it would come to the government,” Jaitley said.

The change in the Customs Tariff Act is aimed at boosting marble and granite producers. “… Some element of protection to domestic industry was required and, therefore, in terms of quantitative restrictions etc., there are a series of non-tariff barriers which today exist… One of the suggestions is, in case the non-tariff barriers at some stage go, because they cannot be permanent in nature, for the protection of the domestic industry a higher duty may have to be imposed as far as customs is concerned,” Jaitley said.

Factories Act

The Lok Sabha alsocleared the Factories (Amendment) Bill that provides for an Occupational Safety and Health Board of India. Labour Minister Bandaru Dattatreya said the Factories Act needs thorough change taking into account changes in manufacturing practices and emergence of new technologies, ratification of ILO conventions and judicial decisions.

The amendments include extending the total number of hours of work on overtime. The changes will also enhance the limit of overtime hours from the present limit of 50 hours per quarter to 100 hour per quarter and to empower the central government and the states to make exempting rules, the minister said.