Lok Sabha Question No. 2291 (UNSTARRED), answered on 2015-12-11
Subject: Tax Concessions to AP
Ministry: FINANCE
Asked by: SRINIVAS KESINENI, BHEEMRAO BASWANTHRAO PATIL, MEKAPATI RAJAMOHAN REDDY, ASADUDDIN OWAISI

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF EXPENDITURE PLAN FINANCE-I DIVISION

## LOK SABHA UNSTARRED QUESTION NO. 2291

TO BE ANSWERED ON FRIDAY THE 11 th  DECEMBER 2015/ 20 AGRAHAYANA, 1937 (SAKA)

## TAX CONCESSIONS TO AP

## 2291.  SHRI KESINENI NANI :

SHRI BHEEMRAO B. PATIL: SHRI M. RAJA MOHAN REDDY: SHRI ASADUDDIN OWAISI:

Will the Minister of FINANCE be pleased to state:

- a)  the details of funds/grants including separate special funds for the new capital, released by the Union Government to Andhra Pradesh during the last three years and the current year;
- b)  whether the Government proposes to give tax concessions to Andhra Pradesh the lines of Himachal Pradesh, if so, the details thereof;
- c)  whether the Union Government is aware that the revenue deficit of Andhra Pradesh is likely to be much more than the estimated deficit; and
- d)  if  so,  the  details  thereof  and  the  steps  taken  by  the  Union  Government  to  provide additional funds to bridge the revenue deficit?

## ANSWER

MINISTER OF STATE IN MINISTRY OF FINANCE (SHRI JAYANT SINHA)

(a): Besides devolution of taxes, Central Government provides to the States nonplan  grant-in-aid  recommended  by  Finance  Commission,  grant-in-aid  under  Central  Sector Schemes  and  Central  Assistance  for  State  Plan  as  provided  in  Union  Budget  each  year keeping in view national priorities and overall development of the States.

Central transfers to Andhra Pradesh during last 3 years and the current years are as under:

(Rs in Crore)

| S. No.   |                                                   | Amount released   | Amount released   | Amount released   | Amount released          |
|----------|---------------------------------------------------|-------------------|-------------------|-------------------|--------------------------|
| S. No.   | Particulars                                       | 2012-13           | 2013-14           | 2014-15           | 2015-16 (till 9.12.2015) |
| 1        | Tax devolution                                    | 20270.77          | 21842.95          | 13692.42          | 14552.86                 |
| 2        | Central Assistance for State Plan (source - PFMS) | 4595.41           | 4163.81           | 17730.70          | 6594.13                  |
| 3        | Centrally sponsored Schemes (source - PFMS)       | 3574.97           | 3466.51           | 3.10              | -                        |
| 4        | Central Sector Scheme (source - PFMS)             | 447.30            | 601.63            | 398.04            | 361.07                   |
| 5        | FC grants                                         | 725.50            | 2475.69           | 3518.13           | 5928.38                  |

Note:  Andhra Pradesh and Telangana were bifurcated w.e.f. 02.06.2014. Hence, the release made after 02.06.2014 are for successor State of Andhra Pradesh.

The  releases  under  CSAP  during  2014-15  include  an  amount  of  Rs.  4403  crore released to the successor state of Andhra Pradesh during 2014-2015 which included Rs. 350 crore  @  Rs.  50  crore  per  district  for  the  development  of  7  backward  districts  covering Rayalaseema & North Coastal  region,  Rs.  2303  core  for  bridging  resource  gap,  Rs.  1500 crore for construction of Raj Bhavan & for creating infrastructure facilities in the new capital of the state and Rs. 250 crore for Polavaram irrigation project.

The Central Government has continued to support the programmes for the development  of  backward  districts  of  Andhra  Pradesh  and  for  creation  of  new  capital  of Andhra  Pradesh  for  building  the  essential  infrastructure  and  released  further  'Special Assistance'  of  Rs.  700  crore  during  the  current  Financial  Year  2015-16  including  special assistance of Rs.350 crore (@Rs. 50 crore per district) for the development of 7 backward districts covering Rayalaseema & North Coastal region and Rs. 350 crore for new capital of the  state  under  Demand  No.  37  of  Ministry  of  Finance.  Further,  Rs.  300  crore  has  been earmarked for Polavaram irrigation project.

- (b): Presently, there is no proposal to give tax benefit to Andhra Pradesh on the lines of Himachal Pradesh.  However, in order to encourage the setting up of industrial undertakings in  the  notified  backward  areas  of  certain  States  including  State  of  Andhra  Pradesh,  the Income-tax  Act  was  amended  vide  Finance  Act,  2015  to  provide   following  direct  tax incentives:
- (i) Investment allowance of an amount equal to 15% of the cost of specified plant and machinery  acquired  and  installed  by  an  assessee  is  provided  as  per  section  32AD  of  the Income-tax Act, if-

a.  he sets up an undertaking or enterprise for manufacture or production of any article or thing on or after 1 st April, 2015 in any notified backward areas of these states; and b. the specified plant and machinery are acquired and installed for the purposes of the said undertaking or enterprise during the period beginning from the 1 st April, 2015 and ending with  31 st March, 2020.

This  deduction  is  available  over  and  above  the  existing  deduction  for  investment allowance  available  under  section  32AC  of  the  Act.  Accordingly,  if  a  company  sets  up  an undertaking  in  the  notified  backward  areas  in  these  States,  it  shall  be  eligible  to  claim deduction  under  the  existing  provisions  of  section  32AC  of  the  Income-tax  Act  as  well  as under  this  newly  inserted  section  32AD  of  Income-tax  Act  subject  to  fulfilling  of  specified conditions.

(ii) For investment in new plant or machinery, additional depreciation of 20% is allowed under the existing provisions of section 32(1)(iia)  of the Income-tax Act in respect of the cost of plant or machinery acquired and installed by certain assessees. The provisions of section 32(1)(iia) of the Act was amended to allow higher additional depreciation at the rate of 35% (instead of 20%) in respect of the actual cost of new specified machinery or plant acquired and  installed  by  a  manufacturing  undertaking  or  enterprise  which  is  set  up  in  the  notified backward  areas  of  certain  states  including  the  State  of  Andhra  Pradesh  on  or  after  the 1st day  of  April,  2015.  This  higher  additional  depreciation  shall  be  available  in  respect  of acquisition  and  installation  of  any  new  machinery  or  plant  for  the  purposes  of  the  said undertaking  or  enterprise  during  the  period  beginning  on  the  1st  day  of  April,  2015  and ending before the 1st day of April, 2020.

(c) and (d): The State of Andhra Pradesh in its budget estimates for 2015-16 has reported revenue deficit of 1.2% of Gross State Domestic Product as against 0% prescribed by the 14 th Finance  Commission.  The  Central  Government  released  Rs.  2303  crore  to  the  State during 2014-15 for bridging the resource gap. Further, Fourteenth Finance Commission has assessed Andhra Pradesh as one of the 11 States to be in post devolution revenue deficit and  hence  recommended  Revenue  Deficit  (RD)  grant  of  Rs.  22113  crore  over  its  award period to Andhra Pradesh. This includes RD grant of Rs. 6609 crore recommended for 201516 of which Rs. 4956.75 Crore has been released so far to State of Andhra Pradesh.

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