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Home arrow News arrow Business News arrow Revenue Department Gives 'In Principle' Nod to NMP proposal for SMEs
Revenue Department Gives 'In Principle' Nod to NMP proposal for SMEs Print E-mail
Written by Viswanath   
Thursday, 21 July 2011
New Delhi: R P Singh, Secretary, Department of Industrial Policy and Promotion (DIPP), said today the national manufacturing policy (NMP) proposal to grant exemption to Small and Medium Enterprises (SMEs) from capital gains tax has ‘in principle’ been approved by the Revenue Department of the Finance Ministry.

He said that one of the key proposals in the manufacturing policy to improve access to finance for SMEs was the exemption from capital gains for investment into an enterprise as is done in the case of investment into a residential property, under Sections 54 and 54(F) of the Income Tax Act.

Mr. Singh was addressing an Interactive Meeting on ‘National Manufacturing Policy’ organized by FICCI.

The ‘in principle’ nod to the proposal by the Revenue Department would go a long way in enabling a large number of entrepreneurs to raise equity by selling ancestral properties and raise their level of investments and thereby boost employment.

The national manufacturing policy also proposes that government procurement with the stipulation of local value addition will be used in areas where government procurement needs over a number of years can be clubbed to create volume and scales. This would foster the development of domestic manufacturing capabilities.

Mr. Singh said that DIPP had given its approval to third party certification in the case of boilers. The policy, he explained, aimed at reducing the intrusion of government departments in the affairs of business to the minimum and therefore stressed the need for self regulation to the extent possible. There could be third party inspections with DIPP performing the role of auditor.

He said that the labour department had certain reservations to the idea, citing ILO regulations as benchmarks and sovereign functions as being paramount. “These are not sovereign functions, but are statutory functions of the government”, he declared.

The DIPP Secretary said that the Department had sought fiscal benefits for skill upgradation by treating it on a par with R&D to avail of 150 per cent weighted deduction on investments in skill upgradation. He expressed the hope that the proposal would be acceded to by the Finance Ministry.

He said that the exit mechanism proposed in the draft manufacturing policy seeks to decouple the disposal of assets from labour dues, a concept that has found favour with the Ministry of Corporate Affairs. The proposal would facilitate expeditious re-deployment of assets belonging to non-viable units as such disposal of assets would be independent of settlement of dues of labour. Full protection would, however, be given to the employees of such units through an appropriate insurance instrument and/or a sinking fund.

Mr. Singh urged industry to have an independent dialogue with the Labour Ministry on issues of concern such as contract labour.

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