Agp Urges Exemption Of Ne Firms From Mat

In a memorandum to Prime Minister H D Deve Gowda, a copy of which was also sent to Union finance minister P Chidambaram, the MPs said the imposition of the minimum alternative tax would take away the only growth-oriented measure introduced by the previous government, which had enlarged Section 81(A) of the Income Tax Act, 1961, to provide tax relief to fledgling industries in the region.

The enlargement of the above section stipulated that industrial undertakings located in the north-east that had begun or would begin production on or after April 1, 1993, would get 100 per cent income tax relief for the first five years and 30 per cent for the next five years.

 

The MPs pointed out that minimum alternative tax, proposed as per the finance bill, would substantially curtail the intended benefit of tax holiday and tax relief under Section 81(A) as the finance minister has overlooked this and has made no exception for the region due to inadvertence or otherwise.

Stressing that the Centre must have a growth-oriented approach towards the north-east in order to encourage the inward flow of funds and to remove regional imbalances, the members of parliament highlighted the economic backwardness of the region in terms of investment and employment.

They attributed the backwardness to the absence of effective measures to neutralise the cost of the impediments faced by industries in the region arising out of factors such as:

* Higher cost of setting up projects due to longer gestation period, higher cost of project related services/facilities.

* Lack of market within the region.

* Unstable operational environment due to mounting unemployment.

* Poor infrastructure/and inadequate communication.

* Geographical isolation - real and perceived.

Highlighting the significant role of the core sector industries which served as a nucleus for industrial growth, the memorandum says, the future industrial development of the region would depend on the development of industries based on petroleum, coal, gas etc.

A few such core industries are a must in order to create a condition for other downstream industries to come up.

The memorandum said that the very capital intensive nature of investments and the cyclical nature of markets in the core sector necessitate maximum use of internal resources and minimum use of borrowed funds for new projects.

MAT will cut into their internal resource generation, force them to borrow at high interest rates of over 20 per cent, thereby eroding the competitiveness of the project internationally. They felt that for the country as a whole, the core sector undertakings should be exempted from MAT on the same consideration on which the infrastructure sector has been exempted from MAT.

Reminding Gowda that the government