In a major rejig in its industrial policy, the state government is considering cutting down tax incentives for mega projects while offering more benefits for small and medium enterprises (SMEs). The government feels it already has its platter full with large projects qualifying for the tax sops that also mean a sizable loss of revenue. Government also feels fresh investment in SME sector has gone down and needs to be boosted.
Currently, projects having an investment from Rs 100 crore to Rs 500 crore or creating 250 to 1000 direct jobs, depending on the districts of the state where they are set up, are categorized as mega projects. SMEs are those with a capital investment in plant and machinery up to Rs 5 crore.
Currently mega projects get a full tax refund on the value added tax (VAT) paid which includes that on the raw material. It is being considered to change refund rules on VAT paid. This will provide a cushion to the government as it will not only get tax beforehand but as refund on the levy paid takes around a year and a half the funds will remain with the state government till then, said a source. SMEs get a refund up to only 25% of the tax already paid and no benefit on the levy paid on raw material.
The new moves are likely to be included in the new industrial policy for 2011. The policy, in pre-draft stage, is being framed in consultation with industrial guilds including Vidarbha Industries Association. The state currently has approved mega projects worth Rs 1,39,000 crore while another Rs 60,000 crore worth are pending approval.
This means the state will have over Rs 2,00,00 crore of mega projects and a proportionate outflow as tax benefits. This is almost a four-fold increase from the projects sanctioned under previous industrial policy in force from April 2001 to March 2007, said a source. There are chances that pending projects will be covered under the new policy of 2011, sources said.
On the other hand there has been a decline in investments in SME sector. The investments during previous policy stood at Rs 8700 crore and these have come down to around Rs 7600 crore in the current policy. The gap will be much higher if the inflation and other escalation in costs are considered. It is now being considered to increase the quantum of VAT incentive being given to this sector. Quantum of tax refund for it may be increased from the present 25% to 50% or even to 100%, said the source. There will be a higher stress on increasing the competitiveness of SMEs.
Benefits like a interest subsidy, as well as subsidizing the expenditure on technological upgradation, patent filing and even energy audit are being considered for this sector.
Vid has Rs 28k cr worth projects
Vidarbha too has a sizeable share of mega projects. As many as 47 mega projects entailing an investment of Rs 28,000 crore have been sanctioned in this region. Of these, those worth Rs 5250 crore have already started production and those with cumulative investment of Rs 6,000 crore are under construction. Government officials feel it is quite a substantial figure for the under-developed region.
Currently, projects having an investment from Rs 100 crore to Rs 500 crore or creating 250 to 1000 direct jobs, depending on the districts of the state where they are set up, are categorized as mega projects. SMEs are those with a capital investment in plant and machinery up to Rs 5 crore.
Currently mega projects get a full tax refund on the value added tax (VAT) paid which includes that on the raw material. It is being considered to change refund rules on VAT paid. This will provide a cushion to the government as it will not only get tax beforehand but as refund on the levy paid takes around a year and a half the funds will remain with the state government till then, said a source. SMEs get a refund up to only 25% of the tax already paid and no benefit on the levy paid on raw material.
The new moves are likely to be included in the new industrial policy for 2011. The policy, in pre-draft stage, is being framed in consultation with industrial guilds including Vidarbha Industries Association. The state currently has approved mega projects worth Rs 1,39,000 crore while another Rs 60,000 crore worth are pending approval.
This means the state will have over Rs 2,00,00 crore of mega projects and a proportionate outflow as tax benefits. This is almost a four-fold increase from the projects sanctioned under previous industrial policy in force from April 2001 to March 2007, said a source. There are chances that pending projects will be covered under the new policy of 2011, sources said.
On the other hand there has been a decline in investments in SME sector. The investments during previous policy stood at Rs 8700 crore and these have come down to around Rs 7600 crore in the current policy. The gap will be much higher if the inflation and other escalation in costs are considered. It is now being considered to increase the quantum of VAT incentive being given to this sector. Quantum of tax refund for it may be increased from the present 25% to 50% or even to 100%, said the source. There will be a higher stress on increasing the competitiveness of SMEs.
Benefits like a interest subsidy, as well as subsidizing the expenditure on technological upgradation, patent filing and even energy audit are being considered for this sector.
Vid has Rs 28k cr worth projects
Vidarbha too has a sizeable share of mega projects. As many as 47 mega projects entailing an investment of Rs 28,000 crore have been sanctioned in this region. Of these, those worth Rs 5250 crore have already started production and those with cumulative investment of Rs 6,000 crore are under construction. Government officials feel it is quite a substantial figure for the under-developed region.
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