Centre extends Kutch tax incentives by a year

The Union government has decided to extend the tax holiday in Kutch district by one more year. Scheduled earlier to end on December 31, 2004, the tax sops will now be valid till December 31, 2005.

The state government has said the one-year extension will ensure that most of the projects in the pipeline will be able to avail tax benefits. Earlier the industry had asked for extending the tax holiday till March 31, 2007.

"More than 100 projects with investments of less than Rs 100 crore will be able to avail of the tax benefits with the extension, as they are likely to get into production stage by December 31, 2005. However, there are 18-odd projects with each having investments in excess of Rs 1,090 crore. They could face problems in meeting the deadline," minister of state for industries, Anil Patel, said on Thursday.

Till date, 32 projects with investments of about Rs 850 crore have already entered into production stage in Kutch district, while 120 projects, with investment of Rs 10,000 crore are in the pipeline. "The state government has received a faxed copy of the notification that has extended the deadline by a year," Patel said.

Earlier in August this year, the Kutch tax holiday issue had gained a political hue, as Union finance minister P Chidambaram made a statement in Parliament that there was no proposal to extend the excise exemption period beyond December 31, 2004.

The Gandhidham Chamber of Commerce and Industry immediately stepped in and appealed to the Central government to rise above party politics and extend the excise holiday to the district by at least two years more.

Replying to a question raised by Pushpadan Gadhvi, MP from Kutch, the Finance Minister had said that as the purpose of the tax holiday was to attract immediate fresh investment, the requests for extending the period beyond December 31, 2004 was not agreeable, as it would have defeated the very purpose of the exemptions.

The Central government announced a special package for Kutch district, which suffered widespread damage in the 2001 earthquake. The special incentives were originally effective from July 31, 2001 to July 31, 2003, but were extended to December 2004.

When the finance minister announced the Budget in July this year, he said that all backward areas apart from Jammu and Kashmir and the North East, which are at present enjoy tax holidays, will be eligible for an extension in tax holiday up to March 31, 2007, but no mention of Kutch was made in the speech.

Immediately after the speech, the state administration contacted Union finance ministry officials, who informed them that these benefits were not for Kutch district.