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Govt plans to revamp SME, SEZ tax regime
October, 18th 2014

The government is getting down to business to boost local manufacturing and create jobs and is working on a series of measures, including revamp of the tax system for the small-scale sector, ship-building and special economic zones (SEZs). Work has also begun on speeding up the system of clearances for the mining and power sector, including allocation of coal, after the government managed to rework the environment and forest clearance mechanism that was seen as a major hurdle for projects to take off.

Senior officials said with elections in two states out of the way, the Narendra Modi government is expected to speed up decision-making in the coming weeks.

The revenue department has asked the commerce department to come up with options related to SEZs, an issue that is being discussed for over a year but has seen no progress, a senior government officer told TOI. At the same time, the finance ministry has made it clear that all tax related proposals — such as those related to restoration of minimum alternate tax and dividend distribution tax exemption — will only be taken up at the time of the Budget.

Similarly, discussions on a new policy for the small-scale sector, including a reworked tax regime, have also started with the cabinet secretariat stepping in on Friday to work out steps that will boost the sector that accounts for around 45% of the manufacturing activity in the country and employs close to 6 crore workers.

A large section in the government believes that a push to the micro, small and medium enterprises is critical to boost job-creation and to check unnecessary imports. The ship-building industry is seen to be a significant employment generator, a key theme of the 'Make In India' campaign launched by the government last month.

At the same time, the government realizes that there is a need for a massive infrastructure creation drive and is trying to make sure that procedures related to getting mining approvals are eased at the earliest. In fact, the project monitoring group in the cabinet secretariat has already begun work on the issue and is working with the private sector to remove bottlenecks. A similar exercise has also been initiated for the power sector, including work on how coal blocks and linkages will be given to those setting up electricity generation units.

Delay in approvals has held up investments of close to Rs 20 lakh crore over the past few years, and even impacted the financial sector. The government has already started working towards solving the land acquisition problems, another complaint of the industry, to make the process simpler.

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