In the wake services sector getting bruised by the Covid-19 pandemic, manufacturing may push the next wave of growth in India and the Union Budget is likely to come up with big incentives for the sector.
The incentives will not only include tax holidays and extension of tax benefits to new and emerging units in the sector but also an extension of production-linked benefits to sectors hitherto not covered.
The government had introduced a low corporation tax regime of 15% for new manufacturing companies in 2019 but they had to commence manufacturing by March 31, 2023. Since the pandemic has obstructed setting up production plants and taking certain other regulatory clearances, it is expected the Union Budget in February may extend the time limit by another two years for the new companies to start production in the new plants, official sources told DH.
In addition, the Budget may even extend the same tax benefits to companies operating in the services sector as the services, which contributes close to 60% to the Indian economy, has suffered the most during the pandemic.
In view of the lacklustre industrial output growth data since the start of the pandemic, the government may also extend the PLI scheme to more sectors. The scheme, announced in the Union Budget 2021-22 with an outlay of Rs 1.97 lakh crore, covers 13 sectors including textile, steel, telecom, automobiles and pharmaceuticals.
The automobile industry, which is experiencing one of the toughest times since the start of the pandemic may see a Goods and Services rate rationalisation. Auto components industry body ACMA has demanded a uniform GST of 18% on all auto parts to lessen grey operations. Currently, the GST on auto components is 28%.
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