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EoUs want longer tax holiday

November 03, 2004 15:01 IST
Last Updated: November 03, 2004 16:29 IST

Export oriented units have approached the finance ministry for abolishing "sunset clause" in the Income Tax Act to get tax exemptions beyond March 2009, so as to attract more investments and maintain their competitiveness globally.

The EoUs have also sought exemption from central sales tax on purchases of capital goods and inputs. A delegation from confederation of export units met revenue secretary K M Chandrasekhar apart from senior commerce and industry ministry officials recently and submitted a charter of demands.

Confirming this, confederation's president Sharad Kumar Saraf told PTI, "We have asked the ministry to remove the sunset clause as laid down in section 10B of IT Act and demanded that EoUs be extended the same benefit as available for special economic sones."

Section 10-B of the Income Tax Act envisages that the EoUs would cease to get tax holiday after March 2009. EoUs want the section to continue without any time limit for future investment in the scheme.

"This sunset clause needs to be removed to allow investment to flow in. Otherwise, no fresh investment is being made in the EoU schemes by the existing or new entrepreneurs," Saraf said.

The government amended section 10B in 2000, and only profits from exports were exempted after April 2001, instead of the entire profit of 100 per cent EoUs, he said, adding EoUs have asked the Ministry to restore the previous clause.

EoUs also asked the government to exempt them from the central sales tax as SEZs are exempted, instead of the present practice of reimbursement of the tax.

EoUs now have to pay CST on purchases of capital goods and inputs and subsequently apply for reimbursement, Saraf said, adding this was leading to blocking of exporters' money for months.

"At present huge amount of refunds are held up with the department for want of funds," he said. EoUs have also pitched for abolition of state level taxes as it only adds to transaction costs and procedural hassles while breeding corruption.

The exporters also demanded abolition of textile cess, levied at 0.05 per cent of the turnover of textile-based EoUs, by central excise department on behalf of textile committee.

Since textile units based in EoUs do not have any interaction with the textile committee nor get any assistance from government, Saraf said, the cess should be abolished as it increased the costs of exporters.

EoUs also wanted the 50 per cent rate of depreciation allowed on all machinery purchased under the Technology Upgradation Fund Scheme to continue till March 2007 instead of March 2004.

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