According to Mr. Ankineedu Maganti, CEO, Soma Enterprise Ltd, "The move of the union government to enable IIFCL to refinance banks in infrastructure projects is a very positive step. In addition to the incremental funding available, banks will take comfort from this move, and be more aggressive in funding projects in various infrastructure sectors.
It would have been a further encouragement for banks to reinstate the income tax exemption provided to banks lending to infrastructure projects under Sec. 10 23G, as this would have reduced the cost of debt.
The announcement of increasing the allocation of funds to Highway, Rail and Urban infrastructure projects though is a positive step, the allocation could have been higher, especially for Highways.
Currently all infrastructure projects executed on PPP basis enjoy tax exemption under Sec 80 IA and pay MAT instead. The steep hike in MAT will impact these projects and reduce the viability. This is detrimental to the impetus the government is trying to give to PPP projects.
The clarification provided in exemption of Excise duty on goods manufactured at site for use in construction is a welcome relief. This had been a cause of tremendous debate over the past couple of years especially with urban projects depending heavily on pre-cast elements etc.
Similarly applicability of Service Tax on construction projects should also have been clarified. Currently, there is significant ambiguity in terms of which projects attract the Service Tax and which do not."
Regards,
Ritu Tanwar
9891598540
Image Public Relations
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