FM sees recovery, offers realty more sops

FM sees recovery, offers realty more sops
The Financial Express, July 28, 2009, Page 1

Steering the Finance Bill’s passage through the Lok Sabha on Monday, finance minister Pranab Mukherjee asserted that an economic recovery is underway and India would be back on a high-growth trajectory by 2010. Reiterating the government’s commitment to economic reforms, he said, “Reform will be on the agenda—it is a continuous process, not a mantra to be chanted occasionally.”

The finance minister admitted that 2009-10 is an “extremely difficult year” and the Centre had reached the limit of fiscal expansion, with tax revenues falling and stimulus measures so far adding up to Rs 2.4 lakh crore. Nevertheless, he introduced a few more concessions for industry and consumers in the Finance Bill with a firm focus on providing a further boost to economic activity.

The most tangible benefits from Mukherjee’s latest dose are expected to accrue to prospective homeowners and the realty sector. Developers of affordable housing projects (units of 1,000-1,500 sq ft) have been granted a tax holiday on profits from projects initiated in the 2007-08 financial year. Such projects would have to be completed before March 1, 2012.

At the same time, the finance minister allocated Rs 1,000 crore to grant a 1% interest subsidy on home loans up to Rs 10 lakh, provided the cost of the home is not more than Rs 20 lakh. This subsidy would be available for one year.

“I expect developers to pass on the benefit of the tax holiday to home buyers by appropriately reducing their prices. I am sure that both the expenditure and tax foregone initiatives would provide relief to a large segment of prospective homeowners and help revive the real estate sector,” Mukherjee said.

While the deadline for tax sops under the Software Technology Parks of India (STPI) and Export-Oriented Units (EOU) schemes was extended to March 2011 in the Budget, Mukherjee on Monday harmonised with them the sunset clause under the Industrial Parks scheme. The scheme, which offered a tax holiday to developers of industrial parks until March 31, 2009, has now been extended to March 2011. Mukherjee hoped this would attract investment into industrial infrastructure.

The tax holiday available to natural gas producers operating blocks licensed under Nelp-VIII has also been extended prospectively those licensed to explore coal-bed methane, from the assessment year 2010-11.

While the creation of new roads and highways is a thrust area in the UPA’s second innings, the finance minister has exempted repair and maintenance work on roads from service tax.

“Construction or laying new roads is exempt from service tax. But repairs and maintenance of roads are chargeable. I propose to remove this anomaly with immediate effect,” Mukherjee said. Granting a month’s time for industry to realign its accounting systems and software to capture the new services brought under the tax ambit in the Budget, the finance minister has instructed the Central Board of Excise and Customs to make the new levies effective from September 1, 2009.