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Measures To Boost Manufacturing & Power Sector

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In this Budget, the government has taken definitive steps to boost the manufacturing and power sector.

During the budget for previous year, the Govt had inserted a provision under which a manufacturing entity which makes investment  in new plant and machinery to the tune of INR 100 crore or more (during the period 1st April 2013 till 31st March 2015) would be allowed a deduction of 15% of such new investment. With a view to further encourage fresh investments in the manufacturing sector, the period of investment under the above provision has been extended till 31st March 2017. Additionally, in order to encourage investment by medium sized companies, the threshold limit of above investment has been reduced to 25 crores i.e. investment in fresh plant and machinery of 25 crores or more would qualify for benefit under this provision.

The Government has also sought to give boost to the power sector by extending the tax holiday benefit available for power sector units set-up before 31st March 2017 (earlier the time limit for set-up of power units has expired on 31st Match 2014). By way of brief background, power units are eligible for 100% tax holiday on profits generated from supply and distribution of power for a period of ten consecutive years beginning with the year in which the undertaking begins to generate power.

Further, under the existing provisions, investment linked tax benefit given to ?specified businesses? allow 100% deduction on capital expenditure during the year in which expenditure has been made. This Budget has increased the scope of ?specified businesses? by including two new businesses within its ambit viz. laying and operating slurry pipeline for transportation of iron ore and semiconductor wafer fabrication unit. 

The above measures are clearly aimed at giving additional fillip to manufacturing and power sector.

Sujit Parakh, Deloitte Haskins, Sujit Parakh, Director, Tax and Regulatory Services, R&D and Government Incentives