MP units resent new order on tax incentives

Small and medium industries have demanded clarification on a policy that bars them from enjoying benefits in the industrial area.

According to the Industrial Promotion Policy announced by the government of MP in 2004, new industrial units (including units undertaking expansion and diversification) with capital investment of more than Rs 10 crore are eligible for tax incentive in the form of remission of tax equal to 75 per cent of the tax deposited in the year. The policy also says that such unit will be eligible to adjust 75 per cent of tax deposited, against tax payable for the next year.

However, the state commerce and industries department has issued a clarification on this facility and has said that each unit will apply for tax refund after depositing tax for the first year of its operation and such refund will be granted by the department through cheque or demand draft after verification.

"This process take will take 3 to 4 years and it will lead to recovery proceedings and undue harassment. It may be appreciated that delay in obtaining certificates from the sales tax department and adjustment thereof by issue of cheque will attract interest under section 26(4) of Commercial Tax Act. It will also unnecessarily block funds of industrial units," a senior office bearer in the CII told Business Standard.

The CII, SME council has advocated that industrial units should be allowed to adjust tax (equal to 75 per cent of tax deposited in previous year) in the next year of operation. After verification, the industries department should transfer appropriate funds to commercial tax department directly so that SMEs can avail it.

"It is a cumbersome process that each unit should approach Industries department to obtain reimbursement equal to 75 per cent of tax deposited in a year. Alternatively, credit vouchers may be issued by industries department based on 'challan receipts' and such credit voucher should be consider as deemed payment of tax against liability of the next quarter," the CII official added.

While speaking to Business Standard, GP Singhal, principal secretary, commercial tax department has said: "Few companies have adopted a new unscrupulous practice to file returns on fake names. They produce receipts and claims refunds, while on verification, a number of companies are missing or only operational on papers. In the absence of computerisation, it is a Herculean task for commercial tax department to refund claims in one go."

However, industries do not agree with the government on the issue. "We wanted immediate implementation of the industrial promotion policy 2004 but even after fours years in job the state government has yet not clarified on 13 announcements made in industrial promotion policy 2004," said a small scale industrialist.

From Indore over telephone adding, "The SMEs do not have options to get tax benefits in Madhya Pradesh and when non-viable Bina refinery has been allowed to get refund of Rs 250 crore as tax each year through budgetary provisions, why SMEs are forced to face a cumbersome process?"