CommerceMin for extending tax breaks in HP,Uttarakhand

Manufacturing units in Himachal Pradesh and Uttarakhand may continue to enjoy tax incentives and capital investment subsidy if the commerce ministry has its way.

Manufacturing units in Himachal Pradesh and Uttarakhand may continue to enjoy tax incentives and capital investment subsidy if the commerce ministry has its way. The ministry of commerce and industry is considering giving extension to industrial package enjoyed by both the states since January 2003.

The ministry is contemplating extending the industrial package,which expired on January 6 this year,up to 2020,an official source told The Indian Express.

The source added that several requests have been received from both the states and have found support in the department.

However,it may be difficult for the proposal to pass muster as the finance ministry has not agreed to extend the tax concessions which lapsed in 2010.

In 2003,the government had announced a package for industrial development of the two states and to provide a fillip to private investment.

The package included fiscal incentives like 100 per cent excise duty exemption for 10 years to the new and existing industrial units on their substantial expansion along with 100 per cent income tax exemption for five years and thereafter 30 per cent for companies and 25 per cent for other entities for a further period of five years.

New industries were also provided a 15 per cent subsidy for capital investment though subject to a ceiling of Rs 30 lakh.

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After the announcement,several pharma and auto companies set up their units in Himachal Pradesh and Uttarakhand respectively.

The tax incentives announced ended in 2010 after which both the states have been writing to us for an extension. The finance ministry is not in favour of the proposal, the official said. Units set up before 2010 are eligible for 10-year tax sops.

A finance ministry official said that the area-based exemptions are being misused and the revenue forgone due to the same is huge. Given the scope of misuse,revenue loss,and flight of capital from neighbouring states,it is highly unlikely that the finance ministry will accede to the request.

Revenue forgone as a result of area-based exemptions applicable in the north eastern states,Uttarakhand,Himachal Pradesh,Jammu and Kashmir and Kutch district of Gujarat stood at Rs 18,500 crore in 2012-13.