Lok Sabha clears Taxation Laws (Amendment) Bill

NEW DELHI: The Lok Sabha on Wednesday passed the Taxation Laws (Amendment) Bill, 2016, relaxing the rules for the textile sector to avail itself of the income tax benefit on additional employment created.

The bill seeks to expand the definition of ‘demerger’ to facilitate the splitting or reconstruction of erstwhile public sector companies and increase the maximum import duty on marbles and granites to 40per cent from 10per cent. The higher 405 duty, the World Trade Organisation bound rate, will give the government flexibility to raise tariffs to protect the domestic industry. The bill was passed by a voice vote and will now be taken up by the Rajya Sabha.

Textiles sector

The 2016-17 budget relaxed the condition for the employment generation incentive available under Section 80JJAA of the Income Tax Act. It provided that a deduction of 30per cent of the emoluments paid to new hires can be claimed for three years provided they are employed for 240 days.

The earlier limit was 300 days. The Union Cabinet had on June 22 approved a special package for employment generation and promotion of exports in textile and apparel sector, further reducing the time to 150 days.

“In view of the seasonal nature of the business of the manufacturing of apparel, there is need to reduce the period of employment of an employee who is employed in this business from 240 days to 150 days,” said the statement of objects and reasons of the bill.

VSNL land

In the case of demerger of entities there is no tax liability relating to transfer of capital asset, carry forward of loss, claim of certain deductions, etc. However, the term ‘demerger’ contained the Income Tax Act does not include reconstruction of a company which ceased to be a public sector company as a result of transfer of its shares by the government.

The amendment will help in the demerger of VSNL, which was privatised in 2002, to create a separate company that will hold the land assets of the erstwhile state-run companies. This will ensure the demerger is not taxable. The government will then use the land as it deems it fit.