HP UNITS SHIFTING TO SIKKIM

New Delhi:16.nov.2009:

Himachal Pradesh has called for extension of the area-based tax incentives, which are going to expire for the state’s industrial units in March 2010. Area-based exemptions are under review as part of the central government’s plans to revamp the indirect tax regime and amid the efforts to introduce a comprehensive goods and services tax (GST) .

Himachal Pradesh is worried that many factories in the state are planning to shift to Sikkim and North Eastern States, as the central government’s policy to exempt duty and tax would continue in the areas.

Speaking at a conference organised by PHD Chambers of Commerce and Industry, Himachal Pradesh chief secretary Asha Swarup said: “We are in dialogue with the government of India to extend it (area based tax exemption). There is a view that will have to be taken on central incentives. The idea for such incentives is not that the industry comes in to for a short period of time and then moves to another state later when the incentives expire. I think you need to take a view that is holistic. The states create infrastructure, that is capital intensive and then there is a flight of industry. It does not help any body,”.

The area based tax exemptions are enjoyed by North Eastern States, Jammu and Kashmir, Uttaranchal, Sikkim and Himachal Pradesh, which have not seen much industrialisation. Factories and industrial units in these regions get full income tax waiver for five years from the date of commencement of the policy and excise duty exemption for 10 years for new projects.

Punjab and Haryana have been complaining about the area based exemptions, as many industrial units shifted to the hill state, especially the Baddi industrial area. Many pharmaceutical companies like Dabur, Ranbaxy have set up manufacturing units in Himachal Pradesh. Swarup said that’s the date for the expiry of area based exemptions draws closer in the state, many pharma companies are planing to move to North East, where factories will continue to enjoy the tax benefits. However, industry secretary Ajay Shankar and senior officials of Punjab and Haryana governments reaffirmed that providing tax incentives is not a sustainable way of attracting investments in to states.

“Incentives do not gives you industry. Good governance, easy labour norms and infrastructure are key to having a right industrial ecosystem,” Shankar said.

YS Malik, principal secretary, Industries, government of Haryana had a similar view to share. “Short term