To promote post-Covid industrial revival and attract greater investment, the Punjab Cabinet led by Captain Amarinder Singh on Friday gave approval to amend the Industrial & Business Development Policy, 2017, for extension of GST formula for availing incentives under the said policy till October 17, 2022.
The move is also prompted by feedback/suggestions from certain industry associations for extending the last date of claiming the GST incentive, given in the notification dated October 17, 2018, and make this last date as coterminous till the expiry of the Industrial Policy of the state.
The fiscal incentive under the present Policy was only applicable for investment proposals received by March 31, 2020 on the Invest Punjab Business First Portal. With the Cabinet decision, the GST Formula notified vide notification no. 4888 dated October 17, 2018 shall be extended for availing incentive under Industrial & Business Development Policy, 2017 till October 17, 2022 (i.e. till the applicability of Industrial & Business Development Policy, 2017).
Notably, the Industrial and Business Development Policy-2017 was formulated and notified on October 17, 2017 to provide the incentive of investment subsidy by way of reimbursement of net SGST. This formula for the calculation of the incentive was approved by the Cabinet on October 17, 2018 and notified on the same day. Thereafter, an amendment was issued on March 7, 2019.
(FRBM) ACT 2003 TO BE AMENDED FOR ADDITIONAL BORROWING
To avail the benefit of additional borrowing of 2% of Gross State Domestic Product (GSDP) in 2020-21, the Cabinet also gave approval to amend Section 4, in Sub-Section (2), for Clause (a) of the Punjab Fiscal Responsibility and Budget Management (FRBM) Act, 2003.
Notably, the Government of India has allowed 2% of GSDP, of which 1% shall be unconditional and remaining 1% shall be conditional to specific reforms.
It may be recalled that in view of the Covid pandemic, the Government of India had decided to provide relaxation in borrowing limits by increasing an additional borrowing limit of upto 2% of GSDP for the year 2020-21 subject to implementation of specific state level reforms as well as amendment of state’s FRBM legislation for the year 2020-21 to this effect. Of this 2%, 0.5% was unconditional and the remaining 1.5% was conditional in respect of reforms viz; implementation of one nation one ration card system; ease of doing business reforms; urban local body/utility reforms and power sector reforms. The weight-age of each reform would be 0.25% of GSDP totalling to 1%. The remaining borrowing limit of 0.50% was to be conditional to undertaking of at least 3 out of the above named reforms.
To compensate the shortfall arising out of GST implementation, the GoI had offered two borrowing Option-I and II to the States, of which, the Punjab state had opted Option-I.
Option-I has given permission to the states to borrow the final instalment of 0.5% (originally intended as a bonus for completing at least three of the four specified reforms) even without meeting the pre-conditions. Thus, Punjab has been allowed 1% unconditional additional borrowing limit in place of 0.5% out of the 2% additional borrowing limit allowed earlier. The remaining 1% additional borrowing limit shall be conditional to above mentioned reforms. Therefore, the state is required to amend its Fiscal Responsibility and Budget Management Act, 2003.