PIB – 08th Jan 2021

Government approves Central Sector Scheme for Industrial Development of Jammu & Kashmir

  • Government of India has formulated New Industrial Development Scheme for Jammu & Kashmir (J&K IDS, 2021) as Central Sector Scheme for the development of Industries in the UT of Jammu & Kashmir. 
  • The main purpose of the scheme is to generate employment which directly leads to the socio economic development of the area. The present scheme is being implemented with the vision that industry and service led development of J&K needs to be given a fresh thrust with emphasis on job creation, skill development and sustainable development by attracting new investment and nurturing the existing ones.
  • The following incentives would be available under the scheme:
  1. Capital Investment Incentive on investment made in Plant & Machinery (in manufacturing) or construction of building and other durable physical assets(in service sector) is available. 
  2. Capital Interest subvention: At the annual rate of 6% for maximum 7 years on loan amount up to Rs. 500 crore for investment in plant and machinery (in manufacturing) or construction of building and all other durable physical assets(in service sector).
  3. GST Linked Incentive: 300% of the eligible value of actual investment made in plant and machinery (in manufacturing) or construction in building and all other durable physical assets(in service sector) for 10 years. 
  4. Working Capital Interest Incentive: All existing units at the annual rate of 5% for maximum 5 years. Maximum limit of incentive is Rs 1 crore.
  • Key Features of the Scheme:
  1. Scheme is made attractive for both smaller and larger units. 
  2. The scheme aims to take industrial development to the block level in UT of J&K, which is first time in any Industrial Incentive Scheme of the Government of India and attempts for a more sustained and balanced industrial growth in the entire UT.
  3. Scheme has been simplified on the lines of ease of doing business by bringing one major incentive- GST Linked Incentive- that will ensure less compliance burden without compromising on transparency.
  4. Scheme envisages greater role of the UT of J&K in registration and implementation of the scheme while having proper checks and balances by having an independent audit agency before the claims are approved
  5. It is not a reimbursement or refund of GST but gross GST is used to measure eligibility for industrial incentive to offset the disadvantages that the UT of J&K face.
  6. Earlier schemes though offered a plethora of incentives. However, the overall financial outflow was much lesser than the new scheme.
  • Major Impact and employment generation potential:
  • Scheme is to bring about radical transformation in the existing industrial ecosystem of J&K with emphasis on job creation, skill development and sustainable development by attracting new investment and nurturing the existing ones, thereby enabling J&K to compete nationally with other leading industrially developed States/UTs of the country.
  • It is anticipated that the proposed scheme is likely to attract unprecedented investment and give direct and indirect employment to about 4.5 lakh persons. Additionally, because of the working capital interest subvention the scheme is likely to give indirect support to about 35,000 persons.

India’s response to S 301 Report of U.S. on Equalisation Levy

  • The U.S. administration had announced initiation of investigation under section 301 of the U.S. Trade Act, 1974 against the taxation on digital services adopted or under consideration by countries, including the Equalisation Levy applied by India. Other counties under investigation include Italy, Turkey, and the United Kingdom.
  • With respect to India, the focus of the investigation was on the 2% Equalisation Levy (EL) levied by India on e-commerce supply of services. The U.S. investigation included whether the EL discriminated against the U.S. companies, was applied retrospectively, and diverged from U.S or international tax norms due to its applicability on entities not resident in India.
  • In this regard, the U.S. requested for consultations, and India submitted its comments to the USTR on 15 July 2020, participated in the bilateral consultation held on 5 Nov 2020, emphasizing that the EL is not discriminatory; but on the contrary seeks to ensure a level-playing field with respect to e-commerce activities undertaken by entities resident in India, and those that are not resident in India, or do not have a permanent establishment in India. It was also clarified that the EL was applied only prospectively, and has no extra-territorial application, since it is based on sales occurring in the territory of India through digital means.
  • India based e-commerce operators are already subject to taxes in India for revenue generated from Indian market. However, in the absence of the EL, non-resident e-commerce operators (not having any Permanent Establishment in India but significant economic presence) are not required to pay taxes in respect of the consideration received in the e-commerce supply or services made in the Indian market. 
  • The EL levied at 2% is applicable on non-¬resident e-commerce operators, not having a permanent establishment in India. The threshold for this levy is Rs. 2 crores, which is very moderate and applies equally to all e-commerce operators across the globe having business in India. The levy does not discriminate against any U.S. companies, as it applies equally to all non-resident e-commerce operators, irrespective of their country of residence.
  • There is no retrospective element as the levy was enacted before the 1st day of April, 2020 which is the effective date of the levy. It does not have extra territorial application as it applies only on the revenue generated from India. 
  • The purpose of the Equalization Levy is to ensure fair competition, reasonableness and exercise the ability of governments to tax businesses that have a close nexus with the Indian market through their digital operations.
  • It is a recognition of the principle that in a digital world, a seller can engage in business transactions without any physical presence, and governments have a legitimate right to tax such transactions.
  • The office of USTR on 6th Jan 2021 released its findings on the section 301 investigation into India’s digital Services tax (DST) and concluded that India’s DST -the equalisation levy – is discriminatory and restricts US commerce. Similar determinations were also made against Italy and Turkey on 6th Jan, 2021, itself.
  • The Government of India will examine the determination / decision notified by the U.S. in this regard, and would take appropriate action keeping in view the overall interest of the nation.

CBIC introduces flagship Liberalised Authorised Economic Operator Package for MSMEs

  • CBIC’s flagship “Liberalised MSME AEO Package” scheme is a voluntary compliance programme which enables swifter Customs clearance for accredited stakeholders in the global supply chain viz. importers, exporters, logistic service providers, custodians etc. 
  • The approved AEOs derive various benefits such as, inter alia, the facility of Direct Port Delivery (DPD) of imported containers, Direct Port Entry (DPE) of their Export Containers, high level of facilitation in customs clearance of their consignments thereby ensuring shorter cargo release time, exemption from Bank guarantees, priority for refund/ rebate/ duty Drawback, as well as a Client Relationship Manager at the customs port as a single point of interaction. 
  • Another important benefit available to specified AEOs is that their payment of Customs duty is deferred and need not to be paid before the clearance of the imported goods by Customs. 
  • An added advantage for Tier 2 AEOs is that their exports to certain countries are accorded facilitation by the foreign Customs administration with whom India enters into a Mutual Recognition Agreement/Arrangement.