Lok Sabha Question No. 2179 (UNSTARRED), answered on 2015-12-11
Subject: Tax Rebate for Backward Areas
Ministry: FINANCE
Asked by: LAXMAN GILUWA, SAKUNTALA LAGURI

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF REVENUE

LOK     SABHA UNSTARRED QUESTION  NO. 2179 TO BE ANSWERED ON FRIDAY, THE  11 TH    DECEMBER ,2015 AGRAHAYANA 20, 1937 (SAKA)

## TAX REBATE FOR BACKWARD AREAS

†2179. SHRI LAXMAN GILUWA:

## SHRIMATI SAKUNTALA LAGURI:

Will the Minister of FINANCE  be pleased to state:

- (a) whether the Government has made only provision for providing tax other rebates for  development  of  backward  areas  so  that  by  developing  backward  areas migration to cities could be stopped;
- (b) if so, the details thereof; and
- (c) the other action taken by Government in this regard?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (JAYANT SINHA)

(a)  to  (c)  :    Development  of  backward  areas  is  a  part  of  the  policy  of  the Government.    In  order  to  encourage  the  setting  up  of  industrial  undertakings  in notified backward areas of the State of Andhra Pradesh or the State of Bihar or the State of Telangana or the State of West Bengal, the Income-tax Act was amended vide  Finance Act, 2015 to provide tax incentives under direct taxes.   Details of tax incentives under direct taxes  recently provided to  backward areas  of above States are given in Annexure-I.

A  statement  indicating  the  details  of  exemptions  under  indirect  taxes  to various States is  also given in Annexure-II.

***

## Details of tax incentives under direct taxes  recently provided to  backward areas of  State of Andhra Pradesh, State of Bihar , State of Telangana, the State of West Bengal are as under:

## (A)         Investment Allowance

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 1st 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  1st April, 2015 and ending with  31st 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.

## (B)   Higher Additional Depreciation

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  the  State  of  Andhra  Pradesh  or  the  State  of  Bihar  or  the  State  of Telangana or the State of West Bengal 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.

## Annexure-II

## A statement indicating the details of exemptions given  under indirect taxes to various States are  as under :

Exemption  from  excise  duty  has  been  provided  to  new  units  and  units  undertaking substantial  expansion  in  the  North  Eastern  States  including  Sikkim,  Jammu  &  Kashmir, Uttarakhand  and  Himachal  Pradesh,  wherein  the  exemption  is  available  for  a  period  of  ten years from the date of commencement of commercial production. These exemptions are based on a package of incentives under the Industrial Policies formulated by Department of Industrial Policy and Promotion for these States, and excise duty concession is one of the elements in such policies.

## The details of Exemption from excise duty are given in the table below:

|   S. No . | Area                                    | No. and Date of exemption notification                                                | Cutoff date for setting up/substantial expansion of unit and start of commercial production   | Period of exemption                                   |
|-----------|-----------------------------------------|---------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------|-------------------------------------------------------|
|         1 | North East Region                       | 32/99-CE dated 08.07.1999, 33/99-CE dated 08.07.1999                                  | 31.3.2007                                                                                     | 10 years from the date of commence ment of production |
|         2 | State of Sikkim                         | 56/2003-CE dated 25.06.2003 71/2003-CE dated 09.09.2003                               | 31.3.2007                                                                                     | -do-                                                  |
|         3 | North East Region including Sikkim      | 20/2007-CE dated 25.04.2007                                                           | 31.3.2017                                                                                     | -do-                                                  |
|         4 | State of Jammu & Kashmir                | 56/2002-CE dated 14.11.2002, 57/2002-CE dated 14.11.2002, 01/2010 CE dated 06.02.2010 | No sunset clause No sunset clause No sunset clause                                            | -do-                                                  |
|         5 | States of Uttarakhand& Himachal Pradesh | 49/2003-CE dated 10.06.2003 50/2003-CE dated 10.06.2003                               | 31.3.2010                                                                                     | -do-                                                  |