Budget 2016: Jaitley announces tax incentives to boost ‘Make in India’


Make in India

With the government giving a big push to the ‘Make in India’ campaign, which seeks to create jobs through domestic manufacturing, Finance Minister Arun Jaitley has proposed several tax incentives and proposals that would make it easier for entrepreneurs to do business in the country. The tax incentives were announced during the Union Budget presented by Mr Jaitley on February 29.

During the ‘Make in India’ week held in Mumbai in February, Prime Minister Narendra Modi had promised investors to provide them a transparent tax regime along with easier licensing and simplified clearing process. Mr Modi had asserted that his government has simplified processes in areas like licences, security and environmental clearances. He had said the government will not resort to retrospective taxation and had spoken about making a tax regime transparent, stable and predictable.

Tax incentives

Some of the tax benefits such as allowing new manufacturing companies an option to be taxed at 25 percent plus surcharge and cess, provided they do not claim profit-linked or investment-linked deductions, will result in an improved cash flow in the initial 2-3 years only.

The government had promised bolstering the ‘Make in India’ initiative, and it is evident that the government is leaving no stone unturned to make it a success. The flagship programme is critical to the government’s plans to revive the under-performing economy.  The reforms that were expected in the aircraft and ship maintenance, repair and overhaul (MRO) sector have come in the form of complete exemption of customs duty on spares imported for undertaking repairs.

Customs and excise duty rates have been revised. This would give cost benefits to key areas of ‘Make in India’ such as IT hardware, capital goods, defence production and textiles, among others.

During the ‘Make in India’ week, India made a strong pitch for investments in next generation infrastructure like roads, ports, railways, airports, telecom, digital networks and clean energy. India has received many investment pledges from foreign investors to be a part of the flagship programme. The Defence Ministry has identified about 25 projects that the government will throw open to the industry for participation soon.