More tax incentives for GIFT City, ship-recycling capacity to be doubled

Industry representatives in the state broadly welcomed Union Budget 2021-’22, with key takeaways for Gujarat being the additional tax incentives for GIFT City, doubling ship-recycling capacity by 2024, increased import duty being perceived as a bid to protect MSMEs and the probability of one of the seven new proposed textile parks to come up in Gujarat.

While a sectoral-dominant proposal with respect to Gujarat’s industries remained largely absent, the Budget proposal by Union Finance Minister Nirmala Sitharaman promised incentives such as tax holiday for capital gains for aircraft leasing companies and tax exemption to the investment division of foreign banks located in International Financial Services Centre (IFSC).

This is the fourth straight year when the Union Budget announced incentives to boost GIFT.

Gujarat industry welcomes GIFT City incentives, doubling ship-recycling City in Gandhinagar. In 2020-21, the government announced setting up an international bullion exchange and in 2019-20, it announced the extension of tax holiday of upto 15 years for a unit that opens in IFSC, bringing in regulations to make GIFT city a hub of aircraft leasing and financing. In 2018-19, setting up of a unified authority for GIFT IFSC was announced.

Chief Minister Vijay Rupani and GIFT City CEO and MD hailed the move, saying it would help attract global players in the fund business, aircraft leasing and financing business and offshore investment banking sector.

Rupani said, “We will get new aircraft leasing companies (come in)”, adding that Kevadia “may benefit from vistadome coaches”. Prime Minister Narenda Modi flagged off the train from Ahmedabad to Kevadia with one vistadome coach in January.

Tapan Ray, MD & Group CEO, GIFT City, said in a statement, “The slew of tax incentives announced for GIFT IFSC in today’s Union Budget have once again reaffirmed the Govt. of India’s commitment to develop GIFT IFSC as a global financial hub. The tax announcement would help in attracting global players in the fund business, aircraft leasing & financing business and offshore investment banking sector to set up their base in GIFT IFSC. The development of world-class Fintech hub at GIFT City announced in todays’ budget will go a long way in promoting and developing Fintech start-ups. GIFT City would provide a platform to Fintech firms to expand globally…”

Meanwhile, Sitharaman emphasised that with India enacting Recycling of Ships Act, 2019 and acceding to the Hong Kong International Convention, “efforts will be made to to bring more ships to India from Europe and Japan”, given that “around 90 ship-recycling yards at Alang in Gujarat have HKC-compliant certificates”.

“Recycling capacity of around 4.5 Million Light Displacement Tonne (LDT) will be doubled by 2024. This is expected to generate an additional 1.5 lakh jobs,” the finance minister added.

Rasna Pvt Ltd chairman and chairperson heading the CII taskforce in ease of doing business, Piruz Khambhatta, cheered the focus on infrastructure as a “greenshoot for the agriculture industry”.

“Industry has been relieved… The fact that infrastructure and investment from India and abroad have been actually catalysed is highly appreciated, especially investments in the agriculture space wherein huge infrastructure is required as agriculture contributes to only 15% of the GDP but provides livelihood to 50% plus. That is where the money should be going… more importantly ensuring that MSMEs get Ease of Doing Business is greatly a welcome move,” said Khambhatta.

Khambhatta, however, sees the high taxation for partnership companies as a bane. “The Finance Minister should have taken industries’ pleas to consider LLPs and partnership companies at par with corporates for taxation… front because the tax are too much in these places and also agri infrastructure cess…,” he said.

Vinod Agrawal, Vice-Chairman at CII Gujarat State Council and Chairman & Managing Director, Arunaya Organics Pvt. Ltd., said budgetary allocations in view of Covid-19 need to focus on broad policies and not specific sectors, which was addressed. “The market rallied so that is a positive sign. Import duty has been increased to protect MSMEs. Seven textile parks are proposed of which one can be surely assumed to be in Gujarat… The government has not shied away from admitting that we will borrow but we will continue the public spending.”

Rupani too pointed out that the “proposal of seven new textile parks and Rs 15,000 crore allocation for MSMEs is something that will aid in Gujarat’s development”.

VP Vaishnav, president of Rajkot Chamber of Commerce and Industry, expressed optimism except for the lack of relief package provided to MSMEs. “It is good to note that no new taxes are proposed and levy of agricultural cess on petrol and diesel will be compensated by a reduction in excise duty… Announcement of doing away with tax on copper scrap will help the brass parts industry of Jamnagar and downstream consumers. But MSMEs were expecting some relief package so that working capital becomes available but it did not happen through allocation of Rs 15,000 crore to this sector is a welcome step. We were also hoping for parity in the retail market by bringing e-commerce firms in the ambit of taxation but that also has not happened. This means, shopkeepers will have to continue competing with non-tax paying operators,” he said.

Piyush Tamboli, chairman, CII – Gujarat State Council and Chairman & Managing Director, Investment and Precision Castings Ltd, said that the budget proposal “almost” matches industry expectations. “The ideas are very good but implementation and fineprint remains to be seen. They have anounced increased import duty on auto components’ manufacturers but we don’t know which items would fall under this category… will only know after the fineprint. A worry (with the auto sector) is the commodity price of steel, which has been rising,” he said.