Investment allowance, correction of inverted duties to spur manufacturing

Budget 2014-15 has attempted to boost the sagging manufacturing sector through a slew of measures.

These include sops to encourage expansion and modernisation, correction of inverted duty structure by lowering import duties on inputs and efforts for coordinated development of the industrial corridors.

Investors in Special Economic Zones (SEZs) looking for restoration of tax benefits, however, were left guessing as Finance Minister Arun Jaitley announced his intention to revive the zones without spelling out specifics.

More companies will now be eligible for the investment allowance of 15 per cent given to companies investing more than ₹100 crore in plant and machinery with the threshold limit being reduced to ₹25 crore. The benefit will be available for three years, the Budget said.

“This will help the small and medium enterprises in their manufacturing endeavour,” said Engineering Export Promotion Council Chairman Anupam Shah.

The Finance Minister also reduced the basic customs duty on a number of raw materials such as fatty acids, crude palm stearin, RBD and other palm stearin, specified industrial grade crude oils from 7.5 per cent to nil for manufacture of soaps and oleo-chemicals.

Basic customs duty was also reduced on crude glycerine, steel grade limestone, steel grade dolomite, battery waste and battery scrap, coal tar pitch and specified inputs for manufacture of spandex yarn.

“This will boost domestic manufacture as also to address the issue of inverted duties (where duties on raw material is higher),” the Finance Minister said.

Jaitley also announced the setting up of a National Industrial Corridor Authority to coordinate the development of industrial corridors, with smart cities linked to transport connectivity.

“It will be the cornerstone of the strategy to drive India’s growth in manufacturing and urbanisation,” he said.

On SEZs, although Jaitley said effective steps would be taken to operationalise them, revive investors’ interest to develop better infrastructure and to effectively and efficiently use the available unutilised land, he did not elaborate.

The Commerce Ministry has asked the Finance Ministry to withdraw the 18.5 per cent Minimum Alternate Tax and 15 per cent Dividend Distribution Tax imposed in 2011-12.

COMMENT NOW