Wednesday, September 10, 2008

Sops to STPI, EoUs not likely to be extended

Even as Finance Curate Phosphorus Chidambaram said that a concluding determination on termination of taxation benefits to export-oriented units (EoUs) and Software Technology Rosa Parks of Republic Of India (STPIs) had not been taken yet, authorities beginnings indicated that an extension of the grants was unlikely.

Finance Curate Phosphorus Chidambaram told Business Standard: "We have got up to March 31, 2009, to take a position on that."

An analysis of a sample set of 328,061 companies, contained in the gross bygone statement, demoes that major taxation outgo on STPIs and EoUs in 2007-08 increased by 30.24 per cent and 30.25 per cent, respectively.

STPIs and EoUs bask direct-tax exemptions under Sections 10A and 10B of the Income Tax Act, 1961, which are put to run out on March 31, 2009. There are more than than 8,000 STPI-registered units of measurement and 2,300 EoU units spreading across the country.

Finance ministry functionaries added that companies should not have got put up units of measurement in STPI and EoUs, knowing that the commissariat were set to stop by March 31, 2009. "Small participants knew that the taxation freedom was ending. If they knew that, why did they put up units," an functionary said, adding that while there was enough clip till March 2009 to take a concluding decision, "how long tin 1 maintain eating milk to children".

A high-power committee, headed by National Manufacturing Competitiveness Council (NMCC) President Volt Krishnamurthy, had recommended to the finance ministry to widen the termination of taxation benefits for EoUs by another year.

Moreover, a finance ministry-sponsored study, conducted by economical think-tank Indian Council of Research in International Economic Relations (Icrier), have also recommended extension of the taxation sops for STPIs and EoUs.

In Budget 2008-09, financial benefits to EoUs were additional tightened by making sale of commodity to domestic duty country more costlier. This was done by increasing basic Customs duty collectible by EoUs for sale of commodity to DTAs from 25 per cent to 50 per cent. This would further squash net income of EoUs, on which lower limit option taxation (MAT) was imposed in last year's Budget.

The sample information showed that gross forgone by STPIs under study was Rs 11,880 crore, which was 20.25 per cent of the sum figure of Rs 58,655 crore.

For the EoUs which were surveyed, the gross forgone figure for 2007-08 stood at Rs 3,978 crore, which is nearly 6 per cent of the sum gross forgone of the sum sample size.

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