“Smaller industries which are essential to the success of the Make in India initiative have got a big draw with the tax incentives…Reducing litigations will put India in a much better spot from the viewpoint of ease of doing business,“ said Gaurav Karnik, tax partner, EY.
However, some of the tax benefits such as allowing new manufacturing companies an option to be taxed at 25% plus surcharge and cess, provided they do not claim profit-linked or investment-linked deductions, will provide with improved cash flow in the initial 2-3 years only.
“The steps are in the right direction but for manufacturing activity to increase significantly a lot more has to be done by making availability of funds, electricity, land to investors,“ said Amarjit Singh, tax and regulatory partner, KPMG India.
Still, the government has largely met expectations that it would boost the Make in India campaign, which is critical to the government’s plans to revive he under-performing economy.
The revised Customs and excise duty rates would give cost benefits to key areas of Make in India drive such as IT hardware, capital goods, defence production and textiles, among others.
In telecom, the government has tried o curb imports of mobile handset components by withdrawing Customs and countervailing duty exemptions to boost local production of mobile phones and peripheral products in India. Hari Om Rai, MD of handset maker Lava International, said the steps may not be enough but they are the right steps.
Some much-awaited reforms in the air craft and ship maintenance, repair and overhaul (MRO) sector have come in the form of complete exemption of Customs duty on spares imported for undertaking repairs. Foreign airlines can bring passengers on aircraft they send for re pair in India, and those aircraft can stay or 60 days without approvals.
“All these proposals are surely a step ahead but the cost of servicing an aircraft in India will not be competitive enough in terms of cost unless the service tax is waived off,“ said Pulak Sen, founder and secretary general of MRO Association of India.
Source: The Economic Times