Investment allowance only to give manufacturing a leg up

Our Bureau New Delhi | Updated on March 05, 2013

Sector focus: Finance Minister P. Chidambaram, with Minister of State S. S. Palanimanikam; FICCI President Naina Lal Kidwai; Assocham President Rajkumar Dhoot and CII President Adi Godrej at a post-Budget interaction in New Delhi on Monday. — Ramesh Sharma

Finance Minister P. Chidambaram has ruled out extending the investment allowance to the services sector, saying the tax benefit is being offered only to encourage manufacturing. He is, however, open to revisiting the minimum limit a company will have to invest in plant and machinery to be eligible for the benefit reintroduced in this >Budget.

Not for other sectors

“Investment allowance is only for the manufacturing sector. Not for other sectors,” Chidambaram said at a post-Budget meeting with apex industry chambers here on Monday.

He was responding to a Confederation of India Industry (CII) member Naresh Trehan’s suggestion that other sectors (non-manufacturing), including health-care, should be eligible for the investment allowance.

Chidambaram also clarified that investments in new plant and machinery after April 1, 2013 — even for projects initiated before that date — will be eligible for the benefit.

CII President Adi Godrej sought to know whether projects under implementation would get investment allowance benefits for plant and machinery purchased after April 1, 2013.

Assocham President Rajkumar Dhoot welcomed the re-introduction of the allowance.

FICCI President Naina Lal Kidwai had earlier urged the Finance Minister to lower the threshold for investment in plant and machinery to Rs 10 crore for two years, against the Rs 100 crore indicated in the Budget.

Lowering the eligibility limit would benefit scores of small entrepreneurs, for whom this support could be crucial, she said.

Chidambaram said lowering the minimum investment limit below Rs 100 crore could make monitoring difficult for the Finance Ministry. “I think Rs 50 crore in a year is a reasonable sum of investment to claim investment allowance on, only for manufacturing,” Chidambaram said.

Later, Kidwai told Business Line that she was hopeful the Finance Minister would revisit the minimum limit, given that such a move can benefit many SMEs.

During the interaction, Chidambaram ruled out rollback of the excise duty hike on sports utility vehicles.

He said the 3 per cent increase in excise duty, from 27 per cent to 30 per cent, will not dampen the demand for SUVs. The increase can be a way of realising the subsidy on diesel, which 98 per cent of the SUVs use, Chidambaram said.

‘Remain on course’

“There will be ups and downs in industry. Grit your teeth and remain on course,” Chidambaram said, in response to a question from Vikram Kirloskar, Vice-Chairman, Toyota Kirloskar Motor, with a set of SUVs in its portfolio. He said demand was down because of interest rates and that the tax increase on SUVs is small.

Chidambaram hoped interest rates will come down, but said the final call will be taken by RBI Governor Subbarao.


Published on March 04, 2013

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