budget

Centre may extend infra tag to tourism, realty

Centre may extend infra tag to tourism, realty

NEW DELHI : The Union government may bring more sectors under the ambit of infrastructure segments eligible for attractive tax benefits, two people aware of the plans said, as it aims to help industries hit hard by the pandemic and boost investments. Sectors given infrastructure status are generally included in the finance ministry’s “harmonized master list of infrastructure sub-sectors. However, they do not enjoy tax benefits under Section 35AD of the Income Tax Act, which permits deduction of entire capital expenditure. Benefits under this section are allowed only for ‘specified businesses’ involved in building and maintaining infrastructure facilities. A proposal to bring more sectors under Section 35AD may form part of the Union budget for the year starting 1 April, the people cited above said on condition of anonymity. Gaining infrastructure status has been a long-standing demand for several sectors, ranging from tourism to real estate. Infrastructure status usually comes with several incentives, including cheaper bank loans, tax concessions and a higher flow of capital. The move is also expected to boost India’s infrastructure sector, a focus area for the government, which has already announced a ₹100 trillion project pipeline. Queries emailed to the Union finance ministry remained unanswered till press time. ‘Specified businesses’ under Section 35AD include those laying and operating cross-country natural gas pipeline networks for distribution, building and operating new hospitals with at least 100 beds, and developing affordable housing projects. On the other hand, the harmonized master list of infrastructure sub-sectors aims to guide agencies responsible for supporting infrastructure in various ways. This list includes roads, highways, railways, power generation, transmission and distribution, solid waste management, sewage treatment, telecom, three-star hotels and above located outside cities with a population of more than 1 million, and special economic zones. In April, ‘exhibition-cum-convention centres’ were included in the list of infrastructure sub-sectors under social and commercial infrastructure. Industry bodies have been seeking uniformity of projects under Section 35AD and the master list. The two people cited above said this is unlikely; however, the list may be expanded, and several projects may be made eligible for Sector 35AD benefits. Abhay Sharma, a partner at Shardul Amarchand Mangaldas and Co., said that generally, depreciation benefits are available to infrastructure companies in a staggered way; however, under Section 35AD, the entire tax benefit can be taken in the first year of commencement of the ‘specified business’. According to a spokesperson for industry lobby group Assocham, infrastructure development requires huge investments, and providing deductions only for certain facilities causes undue hardship on other infrastructure projects. If the deduction is extended to more infrastructure projects, it will encourage investors to develop more infrastructure facilities across the country, the spokesperson said. However, tax expert Ved Jain said that deduction under the section might not be very attractive, as availing of the deduction benefit would mean the company would not be able to take advantage of the lower corporate tax rate. The Hotel Association of India (HAI) has asked the finance ministry to accord the infrastructure industry status to the hospitality sector. K.B. Kachru, vice-president of HAI, said that currently, the hospitality sector pays an interest of around 11%, which can be far lower if it gets the infrastructure tag. Noting that the tourism sector suffers from a gap in world-class infrastructure development in the country’s tourism destinations, HAI said that the gap can be bridged by encouraging investments in the hotel sector by giving infrastructure status for all hotel investments. It has been recommended to declare hotels of above ₹25 crore capital expenditure (excluding land) as infrastructure. Download.

budget 2022-01-07 Livemint