Confusion prevails over tax holiday for Kutch

Top bureaucrats of Gujarat have approached officials of the Union finance ministry asking whether the tax holiday for Kutch district has been extended to March 31, 2007, even as conflicting reports reached here after the Budget speech of finance minister P Chidambaram.

While the finance minister said all backward areas apart from Jammu and Kashmir and the Northeast, which are at present enjoying tax holiday, will be eligible for an extension in tax holiday up to March 31, 2007, no mention of Kutch was made in the speech.

State government sources, however, said immediately after the Budget speech that the state administration contacted Union finance ministry officials, who informed them that these benefits were not for Kutch district.

Following this development, the state government is learnt to have requested the Centre to clarify whether the tax concessions have been extended to Kutch district as well.

Gujarat had made a forceful plea ahead of the Budget that the tax concessions to Kutch which expire on December 31, 2004, be extended till December 31, 2006.

Chief minister Narendra Modi, the Gujarat Chamber of Commerce and Industry and other industry organisations also had demanded this incentive.

"There appears to be some confusion on whether tax holiday extension includes Kutch district. Officially, the state government has been conveyed that it does not include Kutch, but going by the finance minister's speech, it appears that Kutch should get extension. The Gujarat government has requested the Centre to clarify whether the tax concessions are for Kutch district as well," minister of state for industries Anil Patel said.

In case the central government clarifies that the extension of tax holiday includes Kutch as well, then the state government will get more than it asked for.

Following the earthquake that destroyed a majority of structures of the district, a special package was announced for speedy growth of the region. The special incentives were originally effective from July 31, 2001 to July 31, 2003, but these were extended to December 2004.

Kutch district is set to attract investment worth over Rs 10,000 crore if the Centre extends the deadline for excise exemption in the region for three more years.

Kutch has already attracted investments of around Rs 7,500 crore and production at these units is expected to commence before December this year.

Before the Budget, state government officials and ministers had gone on record stating that a representation will be made to extend the tax holiday.

"We will represent the government at the Centre to extend the deadline for excise exemption in the Kutch region by another three to five years. If the deadline for the excise exemption will be extended, the region would attract investments over Rs 10,000 crore," Anil Patel had said last month.

In case the Centre has not made any announcement on tax holiday extension for Kutch, the incentive package will expire in December this year.

Days before the Budget, GCCI president Chinubhai Shah, in a representation made to the Union finance minister, had asked the central government to continue the excise benefits given to new industries set up in Kutch, up to December 31, 2006.

Shah said in view of projects worth crore of rupees in the pipeline in Kutch, it would be fit to extend the tax holiday as these units have already made up their mind to set up units in the district.