Stable duty regime proposed to promote capital goods sector

New Delhi: Government on Friday proposed a long term, stable and rationalised tax and duty structure to promote the capital goods sector, one of the most critical segments for achieving the vision of 'Make in India'.

The National Capital Goods Policy is formulated with the vision to increase the share of capital goods contribution from present 12 per cent to 20 per cent of total manufacturing activity by 2025, said the draft policy released by Department of Heavy Industries.

Stressing on creation of an ecosystem for globally competitive capital goods sector, it proposes uniform customs duty on imports of all capital goods related products.

It also proposes allowing up to 50 per cent CENVAT credit to manufacturers using such products as raw material or intermediates for further processing or using such goods in the manufacturing of finished goods.

It pitches for adoption of uniform Goods and Services Tax regime ensuring effective GST rate across all capital goods sub-sectors competitive with import duty after set-off with a view to ensure level playing field.

The draft makes a case for providing incentives for domestic and global mergers and acquisitions. It also pitches for providing incentives for venture-funding and risk capital to start-up.

Defining the objective of the policy, the paper said the policy is aimed at creating an ecosystem for a globally competitive capital goods sector to achieve total production in excess of Rs 5 lakh crore by 2025 from the current Rs 2.2 lakh crore .

The policy aims to increase domestic employment from the current 15 lakh to at least 50 lakh by 2025 thus providing additional employment to over 35 lakh people.

It is for the first time that a policy on capital goods is being framed and the Department aims to draw up the policy by mid-November, after which it will sent to the Union Cabinet for approval.

"This is the final draft of the policy including comments all stakeholders related to the industry. After the inputs are received, we shall go for final round of consultations. We hope to frame the policy by mid-November," Heavy Industry Secretary Rajan Katoch told PTI.

The last date for sharing comments, suggestions and views on the draft policy is October 31. In May, the initial draft was released.

On availability of industrial financing, the draft pitches for subvention fund for setting up capital goods units and to allow External Commercial Borrowings under automatic route for all capital goods.