Budget 2012: Ieema seeks extended tax holiday for power projects

MUMBAI: Ahead of the Budget, the apex body of the domestic electrical equipment industry Ieema on Wednesday sought extension of the tax exemption to all power projects, including generation, transmission and distribution.

The Indian Electrical and Electronics Manufacturers Association (Ieema) demanded extension of tax exemption to all power projects in line with other infrastructure projects like roads, airports, ports, railways, a press note from the body said here today.

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"The electrical equipment manufacturing industry suffers a substantial cost disadvantage of 14 percent vis-a-vis imports due to the levy of several local taxes," Ieema president Ramesh Chandak said.

He said the government should provide a level-playing field to domestic manufacturers as per the recommendations of the Arun Maira committee by levying customs duty at 10 percent and special additional duty (SAD) at 4 percent and waiving of the countervailing duty (CVD) on all categories of power projects.

"Simultaneously, deemed export benefits in the form of excise duty exemption or refund should also be provided to the domestic suppliers," he demanded.

Currently, all imports are exempted from levy of central sales tax (CST) or value-added tax, while all domestic supplies attract CST at 2 percent and VAT from 5-14.5 percent.

The states are advised to exempt supplies to mega power projects from sales tax and other local levies and not to consider such levies for evaluation of bids, he said.

"Ieema recommends that either there be mandatory exemption of CST/VAT for ultra mega power projects or these levies should be excluded for the purpose of bid evaluation," Chandak said.

Currently, the country consumes about 2.5 lakh tonne cold-rolled grain oriented (CRGO) electrical steel annually and with the growth in demand of transformation capacity, the consumption is estimated to be 11.5 lakh tonne and 13.5 lakh tonne respectively during the 12th and 13th Plans.

"Although SAD has been removed on CRGO, its imports should be allowed at zero duty, till indigenous production is made available," he demanded.

"The domestic electrical industry is facing some instances of inverted duties or anomalies in some products like insulators, where the customs duty rate on the raw materials are either higher or equal to that of finished products. We recommend lowering of the duty on the raw materials and intermediaries in order to remove these duty anomalies," he said.