Reduced tax holiday induces industrial exodus
By Ambika Sharma
Solan, May 27,2009.
With the income tax holiday being reduced to 30 per cent from the earlier 100 per cent (as per the 2003 central industrial package), the pharmaceutical sector in the state was the first to feel the pinch. Already faced with excise duty reduction of 25 per cent, pharmaceutical units have now started shifting their operations to states like Sikkim where more incentives were available.
A top executive of a leading pharmaceutical unit said, “With reduction in income tax holiday, doing business here has ceased to be a lucrative proposition. The sudden reduction in excise duty in non-incentive states from the earlier 16 per cent to 8 per cent in a span of just one year has brought the industry in Himachal almost on a par with other states. The remaining margin gets consumed in meeting freight charges for the transportation of raw material and finished products, leaving little in terms of profitability.”
While companies like Zydus, Cipla, Cadila, Alkem, Intas, Sun Pharma, Indchemie, etc. had already shifted production of a majority of their products to Sikkim, companies like Unichem, Torrent, Aristo, Alembic, Glenmark etc. have either bought land in Sikkim or construction of their plants was already at an advanced stage there.
RK Arora, chairman of the association of pharmaceutical entrepreneurs belonging to Himachal, Uttrakhand and Jammu and Kashmir, said, “The state government should urge the Centre to extend the income tax holiday for a period of 10 years, bringing it on a par with Sikkim.”
Officials of the industries department said it was a condition originally mentioned in the 2003 industrial package and they were endeavouring to get the package period increased to its original term of 10 years (up to 2013). Since Himachal was still at its nascent stage of industrialisation more was needed to uplift it economically. The issue would be taken up if investors made a suitable representation voicing their concern, they added.
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