Companies engaged in infrastructure development might soon lose profit- linked tax benefits. In Budget 2013- 14, the finance ministry is considering doing away with Section 80- IA of the Income Tax Act, under which the government is expected to have forgone 19 per cent of the total revenues not collected on account of various deductions given to companies in 2011- 12. The government might replace profit- linked incentives with investmentlinked ones to boost economic growth.
The government may withdraw Section 80- IA in the Budget," said a finance ministry official, asking not to be named. For 2011- 12, the projected revenue forgone under this head was alittle over Rs. 15,000 crore — about 19 per cent of the Rs. 79,173 crore that could not come due to various profitlinked incentives to India Inc. However, of this, Rs. 27,881 crore is projected to come to the government as minimum alternate tax, so the net loss could be Rs. 51,292 crore. Section 80- IA provides tax holiday for 10 years in a row on profits and gains from industrial undertakings or enterprises engaged in development of infrastructure, such as highways, ports, urban facilities, watertreatment plants, natural gas utilities, hospitals and hotels. Besides, infrastructure development in SEZs, telecom, power, etc, get benefits in the first 15- 20 years of operations. Power has a sunset clause that is likely to be extended by another year. Officials also said profit- linked deductions were misused which led to litigation with assessees. Assessing officers say companies sometimes earn more than ordinary profits by selling to related parties at a higher price than that charged from unrelated ones.
It is also felt some firms divert profits from a taxed segment to an exempt one to avail of tax benefits. "Perhaps, the government is trying to approach it not just from atax perspective but also from an investment point of view. A shift from profit- linked incentives to investment- linked incentives will trigger investment cycle," said Vishal Shah, executive director, PwC. In this sense, the replacement would also lead to saving of revenues for the government, which is trying to narrow its fiscal deficit. However, the profit- linked incentives already given may be grandfathered. This means, only new units would attract the fresh provisions.
The government may withdraw Section 80- IA in the Budget," said a finance ministry official, asking not to be named. For 2011- 12, the projected revenue forgone under this head was alittle over Rs. 15,000 crore — about 19 per cent of the Rs. 79,173 crore that could not come due to various profitlinked incentives to India Inc. However, of this, Rs. 27,881 crore is projected to come to the government as minimum alternate tax, so the net loss could be Rs. 51,292 crore. Section 80- IA provides tax holiday for 10 years in a row on profits and gains from industrial undertakings or enterprises engaged in development of infrastructure, such as highways, ports, urban facilities, watertreatment plants, natural gas utilities, hospitals and hotels. Besides, infrastructure development in SEZs, telecom, power, etc, get benefits in the first 15- 20 years of operations. Power has a sunset clause that is likely to be extended by another year. Officials also said profit- linked deductions were misused which led to litigation with assessees. Assessing officers say companies sometimes earn more than ordinary profits by selling to related parties at a higher price than that charged from unrelated ones.
It is also felt some firms divert profits from a taxed segment to an exempt one to avail of tax benefits. "Perhaps, the government is trying to approach it not just from atax perspective but also from an investment point of view. A shift from profit- linked incentives to investment- linked incentives will trigger investment cycle," said Vishal Shah, executive director, PwC. In this sense, the replacement would also lead to saving of revenues for the government, which is trying to narrow its fiscal deficit. However, the profit- linked incentives already given may be grandfathered. This means, only new units would attract the fresh provisions.
Regards
Prarthana Jalan
__._,_.___
No comments:
Post a Comment