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MSMEs in Punjab upset over extension of sops to neighbouring states

Updated: Jan 28, 2014 03:22:48pm
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LLudhiana, Jan 28 (KNN) The Central Government’s decision to extend tax exemptions to Uttarakhand and Himachal Pradesh has upset small and medium industries in Punjab which will continue to stay in a disadvantageous position viz-a-viz  the competing units in the neighbouring states.
 
The extension of tax exemptions to the units in the hilly states neighbouring Punjab has made MSMEs in the state sit back wondering whether they should shift their operations to the beneficiary states.
 
“The absence of an industrial package for Punjab is forcing units especially the small and medium enterprises to move to neighbouring states like Himachal Pradesh, Uttarakhand and Bihar,” said President of United Cycle Parts Manufacturers Association (UCPMA), Gurmeet Singh Kular.

According to the sources, leading cycle manufacturer Hero Cycles has already bought land in Bihar and the construction has started six months ago in a move to expand the unit.
 
Earlier this month, the Cabinet Committee on Economic Affairs (CCEA) had approved the extension of the special package of industrial incentives for Himachal Pradesh and Uttarakhand from January 7, 2013 to March 31, 2017. The scheme will encourage private entrepreneurs to set up more industrial units in these states, leading to overall growth and industrialisation and generation of more employment.
 
All new industrial units and existing units on substantial expansion are eligible for Central Capital Investment Subsidy at the rate of 15 per cent of investment in plant and machinery subject to a ceiling of Rs 30 lakh. Further, the cap on amount of subsidy is raised from Rs 30 lakh to Rs 50 lakh for MSME units at the rate of 15 per cent of their investment in plant and machinery.

“Punjab being the border state has to import all raw materials from other states. So, the burden of freight charges on the industry is also huge. Moreover, the freight charges in Punjab are higher than other states so we request the government to equalize it,” Kular added.

Industrialists said cheap power and tax benefits in Himachal and Uttarakhand had already caused damage to the industry in Ludhiana and extension of incentives till 2017 would damage them further.

Punjab is also fighting the problem of labour shortage mainly because of skill shortage and MGNREGA.

“The MGNREGA scheme should be linked with the industry. The labourers register themselves with many places simultaneously. They are earning good money, so they don’t want to work with the industries here,” the association chief said.

Punjab Government recently hiked the minimum wage allowance for the labourers from Rs 5,700 to Rs 6,200. The move has put the burden of cost on the industry but has not been able to resolve the issue of labour shortage.

Further, speaking about the infrastructure and higher tax regimes in the state, Kular said, “The infrastructure in Punjab is very poor. The power rate is hiked almost every year. Last year there was 13 per cent hike and the power cuts are more frequent in monsoon and summers.”
 
Recently, Punjab Government has reduced the VAT on iron and steel products and on cigarettes. But the industry is also upset with the VAT on the raw materials which is at 6 per cent.

“We buy the raw materials at 6 per cent VAT, we sell them at 2 per cent, so our remaining 4 per cent is stuck with the government for refund for which we have to keep pushing them,” Kular said.

Ultimately, our money is blocked with the government as we get the refund after a year or two.

Meanwhile, the industry association praised the Government’s decision to remove TDS on the Service Tax.

The Central Board of Direct Taxes (CBDT) last week made it clear that tax need not be deducted at source on the service tax component on payments made/due to a resident payee.

This will be allowed only in cases where the service tax component comprised in the amount payable to a resident is indicated separately in the contract between the payer and the payee, the CBDT has said in a circular.

In such situation, tax has to be deducted on the amount paid/payable without including the service tax component.  (KNN/SD)

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