Odisha may lower SGST to attract industry

The Odisha government is considering incentives on the State Goods and Services Tax (SGST) component to encourage setting up of manufacturing centres.

“In terms of fiscal incentives, earlier the State governments used to offer Value Added Tax (VAT) reimbursement on new investments in priority sectors. Some State governments are mulling how to continue it under th GST regime, and so is Odisha,” Sanjeev Chopra, Principal Secretary, State Industries Department, told BusinessLine.

“We hope to finalise some broad understanding on this within the next month or so,” he added.

Based on focus sectors, Chopra said Odisha was trying to assess the impact of giving or not giving incentives. Broadly, the leeway that the State governments have is with respect to the SGST, he explained.

Focus or priority sector for Odisha includes ancillary and downstream industry in the metal sector; chemicals; plastics and petrochemicals; electronics manufacturing; food processing, including seafood; textiles, apparel and tourism, according to an official statement.

“Some units have come up based on the commitments in the Odisha Industrial Policy Resolution, 2015. It will be unfair for the State government to back out completely on that commitment. We have a provision in the Industrial Policy that we will make suitable changes in the policy as an when the GST regime kicked in,” Chopra said.

“Now that it has happened, the State government is deliberating on how to move to a more finely tuned regime for SGST reimbursement,” he added.

BusinessLine reported in June this year that area-based excise exemptions given to the industry by the North-Eastern and hill States, including Uttarakhand, Himachal Pradesh and Jammu and Kashmir, will shrink considerably under the GST regime.

Though the Cabinet Committee on Economic Affairs has extended the area-based tax breaks for residual 10 years in August, this was largely limited to hilly states.

On whether new projects in the State can expect such incentives, Chopra said: “Since there is no VAT now, whatever policy we define will apply to both existing and new units.”

Odisha was in the limelight recently after it decided to withdraw a VAT deferment to Indian Oil’s Paradip Refinery in February this year. This incentive was restored in August after talks between the Centre and State.

In response to a query on how this incentive would shape up once petroleum products are brought under GST, Chopra said: “We will cross the bridge when we come to it.”

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