KATHMANDU, July 24: In an effort to give a new lease of life to slowing industries, the private sector has asked the government to offer them a slew of incentives that include exemption of income tax, investment subsidy for laying down industrial infrastructures and special additional protection for small and cottage industries.
The demands include exemption of corporate income tax for the industrial sector by at least five percentage points compared to the rate slapped for others and subsidy in investment for developing industrial infrastructure in remote districts.
"Our industries are passing through years of slowdown amid weakening competitiveness. Without incentives we can´t increase our contribution to the industrial sector," Dinesh Shrestha, executive member of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said while presenting a set of suggestions on behalf of the private sector for the upcoming Industrial Enterprises Act, at an interaction on Monday.
Shrestha asked the government to provide 90 percent income tax exemption to all national priority industries for seven years from their commencement.
As per a provision in the existing act, only select national priority industries such as hydropower, mining, cement and petroleum exploration are entitled to that incentive.
Entrepreneurs have also sought a provision for deducting spending on social service and philanthropic purposes from profits for income tax proposes.
Amid increasing cost of production due to exorbitant bank interest rates on industrial credit, the private sector has also demanded credit at a maximum 5 percent interest along with adequate incentives for exports.
Demanding clear procedures for duty draw back on exports, a provision for settling dues within 45 days of application by exporters has likewise been sought in the upcoming act.
The private sector also wants the government to collect one percent customs duty on imports of industrial equipment such as stabilizers, quality testing machines and UPS batteries, in addition to other goods such as machineries, transformers, industrial tools and equipment used by quality testing labs.
With the hope of promoting small scale industry, the FNCCI has also demanded exemption on excise duty and income tax for such firms for up to seven years followed by 75 percent, 60 percent and 50 percent exemption in succeeding years.
To ensure easy access to loans at consessional rates an Industrial Bank has been suggested under the upcoming act.
Business people further suggested that the government make a provision for only 80 percent income tax in the years when industries provide at least one-third of total employment to women, differently-abled people, minorities or oppressed people.
In addition to the existing provision under which the government can arrange necessary land for industries, business entrepreneurs have also demanded that the government facilitate the acquisition of private land for industrial proposes.
Establishment of a women entrepreneur fund and a handicrafts and cottage industry village and introduction of a small and cottage industry credit program to provide loans at a maximum of five percent interest are among other suggestions put forth.
Demanding revocation of the existing provision of five million rupees penalty for those operating without registration or operating permission, the entrepreneurs have suggested a penalty between Rs 5,000 to Rs 300,000 depending on the size of the industry and nature of the offence.
Similarly, recognition of only one authorized trade union at industrial firms and provision of an industrial fund for the social security of entrepreneurs are also sought.
They also suggested that the government designate as sick those industries that face an abnormal situation including losses for the last five consecutive years, frequent strikes, power interruption and blacklisting for defaulting on loans, among other things.
Highlighting the provisions in the proposed amendment to the act, Anil Kumar Thakur, joint secretary at the Ministry of Industry (MoI), announced exemption of income tax for micro enterprises, a five percentage point discount on income tax for industries, and exemption of income tax by 90 percent, 80 percent and 70 percent for 10 years for industries established in the least developed, underdeveloped and less developed districts respectively.
Similarly, Thakur said the proposed act envisages exemption of income tax by 25 percent for a particular year if employment is provided for six months to over 100 people in the case of small entreprises, to over 200 people in the case of medium scale industries and to 500 people in the case of big enterprises. Exemption of income tax by 90 percent for national priority industries for seven years is also proposed in the draft act.
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