Badal govt takes sop story to SC

The Punjab government has approached the Supreme Court against the tax incentives given by the Centre for setting up industries in the neighbouring Jammu and Kashmir, Himachal Pradesh and Uttarakhand.

The Punjab government has approached the Supreme Court against the tax incentives given by the Centre for setting up industries in the neighbouring Jammu and Kashmir, Himachal Pradesh and Uttarakhand.

Describing the central government’s sops, including excise duty waiver, income tax holidays and investment subsidies, to industries in the three states as “discriminatory”, the Shiromani Akali Dal-BJP government has asked the court to restrain the Centre from doing so, as the policy has resulted into mass exodus of industries from Punjab.

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Income tax and Central excise waivers given to the three states has resulted in discrimination against Punjab, it said.

Explaining the implications of the tax incentives to its neighbouring states, the Punjab government said goods manufactured in Punjab will have to pay central excise whereas goods produced in Himachal Pradesh, Jammu & Kashmir & Uttarakhand will be exempt from payment of Central Excise.

Resultantly, the goods produced in Punjab will be expensive in comparison to these states and cause a discrimination against trade and commerce of Punjab, it said, contending that it violated Article 301 of the Constitution (freedom of trade and commerce throughout India) and Article 303 that puts restrictions on the powers of the Union and the states to make laws with regard to trade and commerce discriminating between one state and another.

“The grant of discriminatory fiscal incentives to industries set up in the neighbouring states has led to a mass exodus of industries from Punjab to its neighbours, resulting in crippling of its industrial and economic growth,” Punjab’s civil suit stated. The state’s counsel Ajay Pal said the matter would come up for hearing in January 2010.

New Industrial Units preferred to be located in the adjoining areas of the neighbouring states and even the expansion of existing units in Punjab moved to locations where better incentives were available, the suit filed by Punjab stated.

Alarmed by the situation, Punjab Chief Minister wrote to the Prime Minister, union ministers for disinvestment, commerce & industry as also the union finance minister to either extend similar benefits to Punjab or its border areas or to restrict the incentives given to the neighbouring states only to their interior areas.

In case grant of either of the two concessions was not possible, then similar incentives should be granted to Punjab’s areas adjoining the States of Himachal Pradesh, Jammu & Kashmir, the suit demanded.
The Punjab assembly too had passed a unanimous resolution on April one 2003 requesting the Centre to provide the same Special Package of Incentives to the Industrial units in Punjab that had been given to the neighbouring states.

According to the civil suit, Punjab government’s plea for tax incentives in districts bordering Jammu and Kashmir and Himachal Pradesh was, however, rejected by the Centre fearing that similar requests by other states might have adverse implications for tax revenue.

“Income tax and central excise waiver to the states neighbouring Punjab has resulted in discrimination against Punjab and preference for tax-holiday-enjoying states, whereas it is prohibited by Article 303 of the Constitution of India.

The Centre first ordered tax concessions to new industries in Jammu and Kashmir in June 2002 and extended similar benefits to existing ones for making substantial expansion.

“Similar fiscal concessions were provided to industrial units of Himachal Pradesh and Uttaranchal in January 2003,” said the Punjab government. Cent per cent excise duty exemption was granted for 10 years from the date of commercial production, it added.

Attracted by the concessions, 160 industrial units of Punjab have either shifted out or set up their expansion units outside with an investment of about Rs.3,000 crore, the Punjab government said adding the collection of central excise from Punjab had also fallen from Rs.2,786.46 crore in 2003-04 to Rs.819.21 crore in 2005-06.