Tuesday, September 12, 2006

Govt plans to offer tax breaks, fiscal sops to spur R&D

It’s going to be a joy ride for the auto manufacturing sector in India, with the government mulling several incentives for the industry. To prepare a comprehensive manufacturing competitiveness plan and provide R&D incentives to the sector, the government has set up two committees — one on fiscal incentives and the second on duty structures. R Mashelkar will head the panel on fiscal incentives.

The panel will consider providing 100% grants for fundamental research, 75% for pre-competitive research and 50% grants for product development. It will also consider zero tax on technology transfer for products, features and alternate fuels, among others.

The committee will also look at the feasibility of increasing the weighted tax deduction for expenditure under R&D from 150% to 200%. It is also looking at extending the period of applicability of the tax set-off from 2007 to 2016. In addition, the committee may recommend duty concessions for auto products made in India. The proposal, put forth by the ministry of heavy industries, involves extending excise duty benefits to vehicles and components designed and developed by Indian companies with their own IPR, and even those which cannot be patented but can be registered under the design and copyright laws.

The panel will also consider a proposal to allow design registration in two other countries, other than India. If the committee accepts the recommendations of the ministry of heavy industries, the IPR for a product designed and developed in India will be held by the company registered in India, even if it is the subsidiary of a foreign company.

The Anwar ul Hoda Committee is working on a three-tier tariff structure along with rationalisation of taxes on inter-state and inter-city movement of vehicles and goods. The committee is also considering setting up a technology upgradation fund and virtual SEZs for the auto sector.

This apart, the Hoda committee will also consider the establishment of auto parks, which may be set up on a public-private partnership model.

Source:- EconomicTimes