Semiconductor units to get SEZ benefits
To boost the semiconductor industry, the govt may give it the same fiscal incentives given to the SEZ units.
By Subhash Narayan, TNN |
NEW DELHI: In a bid to boost the semiconductor and nano technology sectors in the country, the government is planning to extend a host of fiscal incentives including benefits at par with special economic zones (SEZ) units and application of lower Cenvat rate of 4%.
The finance ministry, which is evaluating the scheme of fiscal incentives to be included in the Fab Policy, has agreed to extend incentive schemes applicable to SEZ units to semiconductor industry too, an official source said.
| • Fab Policy to be placed before Cabinet for approval • Units may get income-tax and excise benefits on par with special-category states • Finmin no to IT ministry request for R&D grants • Depreciation at 33% to be distributed over three years • Industry seeking more fiscal incentives due to its capital-intensive nature |
The ministry has, however, toned down a proposal from the IT ministry to reduce Cenvat rate to 4% for the entire industry agreeing to restrict the sop only to high-tech areas, the source added.
The changes are now expected to be included in the Fab Policy that is soon expected to be placed before the Cabinet for approval.
Differences between the IT ministry and the finance ministry over fiscal package for the semiconductor industry had held back announcement of the Fab Policy. Finance minister P Chidambaram mentioned about the policy in his Budget speech this year.
The finance ministry has also agreed to look into a proposal to extend income-tax and excise benefit to semiconductor units at par with those available in special-category states such as Uttaranchal and Himachal Pradesh. It has, however, turned down IT ministry’s request to give grants to the units for R&D activities.
With regard to depreciation benefit, both finance ministry and Planning Commission are of the view that instead of giving 100% depreciation benefit in the first year itself, the same should be offered at 33% each for three consecutive years with unlimited loss carry-forward facility. The IT ministry had favoured depreciation of 100% because of high obsolescence of equipment used by the industry.
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Sources said that finance ministry is also evaluating a proposal for extending net foreign exchange positivity clause — a unit becoming net foreign exchange earner for getting tax sops — for semiconductor industry by 10 years. In the case of SEZs, the units have to become net foreign exchange earners by fifth year of operation.The semiconductor industry has been seeking fiscal incentives due to its capital-intensive nature. The cost of setting up a typical semiconductor fabrication utility works out to Rs 4,000 crore.
If the government approves net set of incentives in the semiconductor policy, it would give impetus to projects like that of SemIndia’s which is planning to invest $3 billion for setting up a semiconductor fab plant at Hyderabad. Global giants such as Intel and Texas Instruments are also looking at major investments in manufacturing of chips.
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