In spite of the pressure from Punjab government on the Centre to withdraw tax holiday package from hill states like Himachal Pradesh (HP), the later has continued its struggle for the extension for the industrial package.
Exemption of central excise duty under the tax incentives package, which is being enjoyed by the industry in HP, will come to end in 2010. Moreover, the income tax benefit will expire in 2012 and subsidy on capital investment will also finish in 2013. The end of incentives would certainly hamper the growth of industrialisation in the state and so,
Himachal Pradesh?s chief minister Prem Kumar Dhumal is putting sincere efforts to get the extension.
Punjab, on the other hand, has been blaming that due to the package, most of the state-based industrial houses shifted base to HP to get the tax benefits. The Punjab government will file a case with the Supreme Court of Rs 10,000 crore damage meted out due to the central government’s policy of offering tax incentives to its neigbouring states, which encouraged various industries to shift base from Punjab.
Talking to FE, Dhumalsaid, “With tax incentives coming to an end, the pace of industrialisation will definitely slow down. A businessman always looks for profits and most of them come to the state due to tax holiday. We are trying hard to get the extension. Punjab has been alleging that due to tax holiday in HP, their industry has suffered. It is a wrong perception that the industry shifted base from the Punjab to establish their units here. Most of them have gone for expansion and moreover, Punjab does not carry any reliable data in this regard”. However, Dhumal refused to comment on whether he was hopeful to get the extension of industrial package.
On the contrary Jagdeep Singh, president of Punjab Drug Manufacturers Association explained , “It wont be possible to get the extension as the Centre will come up with goods and services tax (GST) by 2010 . This new taxation will provide a level field to all the states. However, there is disparity of 30 % in the cost due to tax holiday in HP and Uttranchal. Most of the pharma industries have shifted their manufacturing base from Punjab to HP. Unless this disparity is removed, the pharma industry will not invest in Punjab.?
HP had received a special package for the industries from the Centre in 2003. This package included 100% exemption from payment of central excise duty for a period of 10 years, 100 % income tax exemptions for five years and 15 % capital investment subsidy on investment in plant and machinery subject to a ceiling of Rs 30 lakh.
Since the announcement of the special incentive package, HP has approved 936 new investment proposals and 79 expansion proposals in medium and large scale sector. Besides, the state government has approved of 9,843 new investment proposals and 237 expansion proposals in the SSI sector.
With these projects, the Himachal government envisaged investment of Rs 30, 571. 53 crore and employment potential for 3, 76, 975 people. Already, the Baddi-Barotiwala has emerged as the pharma hub for north India.
