Sops galore in industrial policy

A flat 50 per cent tax refund on VAT and an additional 5 per cent investment subsidy to women entrepreneurs besides provisions such as power subsidy and infrastructure support for the new industries are going to be some of the prominent features of the state government's new industrial policy. The policy is now at an advanced stage of finalisation.

The industrial policy, which is expected to be announced in the first week of April 2005 will hold good for a five-year period. And the tax refund scheme is also expected to cover a whole five-year period.

"Our's is going to be the best package of incentives for the prospective investors across the major states in the country," an industry department official said.

Once the new policy comes into force, all kinds of duty exemptions apart from tax sops are expected to be available only in the form of reimbursement in the state.

This measure will help in reducing the revenue deficit of the state and, in turn, give additional points to the government which will help in getting more allocations from the Planning Commission, officials say.

Through refund mechanism, the government will now be able to quantify the exact amount of incentives given to industries, according to commercial taxes department officials.

Even though refund to the extent of 75 per cent on the tax paid by a company is available in states like West Bengal, the state government, however, is learnt to have decided to settle at a 50 per cent level citing other advantages like power subsidy provided in the proposed policy, which are absent elsewhere.

The government is consulting various departments to determine the size of the fund that has to be created for the purpose of tax refunds and power subsidies and also on a mechanism required to handle financial transactions of the refund schemes to be adopted from the new financial year.

Considering the average value of tax incentives and exemptions are estimated at around Rs 800 crore and a Rs 1,200-crore revenue from industrial sector through sales tax receipts every year, the industries department has proposed a fund with a size ranging between Rs 300 and Rs 400 crore.

The government is also expected to offer 15 per cent investment subsidy to women entrepreneurs. It is higher by 5 per cent compared to the investment subsidy to be offered to other investors.

According to sources, the new industrial policy is also going to feature an interest subsidy scheme. This concept is borrowed from other states.

Among other things, the state government is also holding discussions to determine the per unit power subsidy to be extended under the new industrial policy. Officials are considering two alternatives "" one is a 50-paise subsidy and the other is a 75-paise subsidy on each unit consumed by the industries.

Though the government originally thought of giving a subsidy of Re 1 on each unit, it has changed its stance following the marginal reduction of industrial power tariff by the Andhra Pradesh Electricity Regulatory Commission (APERC), officials said.