SMEs to be exempt from capital gains tax: Official

July 20th, 2011 - 10:51 pm ICT by IANS  

New Delhi, July 20 (IANS) A proposal to exempt small and medium enterprises (SMEs) from capital gains tax has received in principle approval from the finance ministry, an official said Wednesday.

“One of the key proposals in the National Manufacturing Policy to improve access to finance for SMEs was the exemption from capital gains for investment in an enterprise as is done in the case of investment in residential property,” said R.P. Singh, secretary, department of industrial policy and promotion (DIPP) at a meeting on the policy.

“The in principle nod to the proposal by the revenue department would go a long way in enabling a large number of entrepreneurs to raise equity by selling ancestral properties and raise their level of investments and thereby boost employment,” he added.

The policy aims at reducing the intrusion of government departments in the affairs of business.

Singh, however, added that the labour department had certain reservations to the idea, citing International Labour Organisation regulations as benchmarks and sovereign functions as being paramount.

“These are not sovereign functions, but are statutory functions of the government,” he said.

Hoping that the proposal would be accepted by the finance ministry, Singh said that the exit mechanism proposed in the draft manufacturing policy seeks to decouple the disposal of assets from labour dues, a concept that has found favour with the ministry of corporate affairs.

The proposal would facilitate expeditious re-deployment of assets belonging to non-viable units as such disposal of assets would be independent of settlement of dues of labour.

Full protection would, however, be given to the employees of such units through an appropriate insurance instrument.

Singh also urged the industry to have an independent dialogue with the labour ministry on issues such as contract labour.

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