More than 3 years after the hill-based tax incentives expired, the fresh hope of reviving the central tax package for Uttarakhand and Himachal Pradesh has finally been shattered. This was confirmed by Union Commerce Minister Anand Sharma, who said a new package is being worked out for hill states which would consist of capital and freight subsidy only instead of excise and income tax incentives.
This is being seen as relief to states like Punjab, Haryana, Gujarat and Bihar which had been opposing the central tax incentives for the two hill states tooth and nail and the package was being touted as "flight of the industries" to Uttarakhand and Himachal.
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During his one day visit to Uttarakhand where he laid the foundation stone of a spice park, Sharma said the new package of capital and freight subsidy would be approved by the centre very shortly. "I cannot give you the date, but it will be done very shortly," he said before leaving for New Delhi.
Interestingly, the capital and transport subsidy is also being given by the Uttarakhand government under the 2008 hill promotion policy.
The Former NDA government in 2003 had notified the tax incentive package which turned out to be a big trigger for the industries to set up units in the two states.
In Uttarkahand alone, the package attracted investments of more than Rs 30,000 crore in terms of new industrial units of top notch companies like Tata Motors, Nestle, Hero Motocorp and Bajaj Auto. The industrial growth in Uttarakhand too shot up to 26 percent in the first 5-7 years. In 2012, the then finance minister Pranab Mukherjee had described the package as "distorted policy."
However, in a relief to the industry, the Central Board of Excise and Customs (CBEC) had stated that "the provisions of the notifications (issued in 2003) do not place a bar or restriction on any addition/modification in the plant or machinery or on the production of new products by an eligible unit after the cut-off date (March 31, 2010) during the exemption period of ten years as per the notification." Taking the advantage of this relaxation, many existing units have undergone sizeable expansions in the state.