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MoF rejects tax sops for metro projects
October, 16th 2006

Metro rail projects aspiring for tax sops are in for a rude shock. Keen to weed out tax exemptions, the finance ministry has decided not to give them any tax breaks.

The revenue department has already turned down the tax-exemption pleas of Delhi Metro for its expansion plans. The axe has now come down on the proposed Bangalore metro project too. Officials said other projects like the Mumbai metro would also face the same fate.

It is being apprehended that long-term tax waiver policies for several other infrastructure and core sectors too may be reviewed in line with the governments policy to limit such exemptions. For instance, the finance ministry has been mulling over introducing a sunset clause for the tax waivers given to power companies.

While rejecting the plea for tax breaks to Bangalore Metro, the revenue department has sought detailed projections of revenue flows, passenger traffic, and year-wise cost of importing capital goods.

Sources said when the detailed projections are given, one time grant could be considered in the Budget. However, a blanket exemption running into perpetuity has been ruled out.

Earlier, the department had turned down DMRCs plea for tax exemptions for its next phase of expansion. In this case too, the department held the view exemptions could not be given in perpetuity. Revenue flow has already started for DMRC, officials said.

The revenue departments view is in line with the finance ministrys attempts to curtail tax sops. In the case of special economic zones (SEZs) too, the department is wary of large-scale tax sops.

Officials of the revenue department apprehend huge revenue loss on account of the sops given to SEZs. In fact, impact of various exemptions on excise front is already proving to be a drag. Excise collections have been witnessing lowest growth rate as compared with other taxes.

Though, overall revenue collections have been buoyant on the back of a booming economy, large-scale exemptions have still managed to cast its shadow on excise which grew only by 6.7% in the first half of current fiscal.

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