In order to keep with the proposal of offering employment in coastal zones and thereby wooing various multinational firms, India may start offering incentives like zero service tax, zero goods tax as well as zero corporate tax holidays in the states of Andhra Pradesh and Gujarat.
According to officials, the government is thinking of offering such incentives to the companies that offer a commitment to create certain number of jobs for the Indian citizens. These incentives may also comprise of an equivalent public investment in the two states on behalf of the Central government for creating infrastructure and a uniform tariff structure for industries. This comes in the face of the fact that a number of multinational organizations are looking for locations other than China where they can acquire labor at a low cost but which boast of premium infrastructure.
According to a senior official, Niti Aayog, the premiere think tank has been entrusted with the task of designing a detailed project report for the coastal employment zones, following innumerable discussions that were held at the office of the Indian Prime Minister. He added that the project report will be created by a high end team of the Asian Development bank for the CEZs that are located in the eastern and western coasts of India namely, Andhra Pradesh and Gujarat.
It is being said that among the tax incentives being planned to be offered, one could be offered a corporate profit tax holiday for a span for five years for the companies that create 10000 jobs. The other incentive could be a 0 GST for 3-6 years for the companies that create 10000 to 20000 jobs respectively. According to the official, these will be sure shot benefits to the firms when compared to the corporate profit tax holidays that need to be accrued and can be gained only when the company makes a profit.
Irrespective of what the benefits and incentives offered, these are sure to be an attraction to the companies that are instrumental in the labor intensive sectors like apparels, electronics and footwear. On the other hand, the companies that do not create 10000 jobs may not receive any tax benefits. However, they are sure to gain from the CEZ’s business friendly ecosystem which would be inclusive of liberal labor laws. Furthermore, the Aayog has proposed that the Central Government may also invest up to INR 5000 crores in both the zones over a period of three years to help with the development of infrastructure and residences for housing the work force.
It has also offered full time electricity supply at rates that are at par with the global levels and along with autonomous administration from the respective state governments to create a contemporary business environment. The other incentives that are being considered are closeness to deep draft ports, facilitation of trade, liberalization of trade, government investment, autonomous administration, more flexibility in regulations of land conversion and liberal business structure. Another good news is that CEZ creations would not require any legal interventions from the Central Government.
According to an official, though the Aayog was not really keen on the CEZ set up idea, it has now gone ahead and created a high end committee that is being headed its CEO, Amitabh Kant, to discuss and finalize the project details with the two states. It is believed that the formal proposals for these will soon be released. The Aayog said that the Central Government will have to play an important role to liberalize the trade rules and enhance the speed of the trade in these areas. It added that the government should offer a uniform industrial tariff of up to 7% which would not have any adverse effect on the tax revenues but will liberalize the business environ and will reduce the chances of misclassifying imports to waive off the tariffs.
It added that the government will also have to make efforts to create zones and warehouses that free of bonded trade in these CEZs to improve imports and exports making sure that the custom duty and local taxes would be applied only when these companies sell their products in the domestic market.