Semiconductor, nano technology units to get SEZ benefits

By agencies   |   Tuesday, 24 October 2006, 07:00 Hrs
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New Delhi: In a bid to boost the semiconductor and nano technology sectors in the country, the government is planning to extend a host of fiscal incentives including benefits at par with special economic zones (SEZ) units and application of lower Cenvat rate of 4%.

The finance ministry, which is evaluating the scheme of fiscal incentives to be included in the Fab Policy, has agreed to extend incentive schemes applicable to SEZ units to semiconductor industry too, an official source said.

The ministry has, however, toned down a proposal from the IT ministry to reduce Cenvat rate to 4% for the entire industry agreeing to restrict the sop only to high-tech areas, the source added.

The changes are now expected to be included in the Fab Policy that is soon expected to be placed before the Cabinet for approval.

Differences between the IT ministry and the finance ministry over fiscal package for the semiconductor industry had held back announcement of the Fab Policy. Finance minister P Chidambaram mentioned about the policy in his Budget speech this year.

The finance ministry has also agreed to look into a proposal to extend income-tax and excise benefit to semiconductor units at par with those available in special-category states such as Uttaranchal and Himachal Pradesh. It has, however, turned down IT ministry’s request to give grants to the units for R&D activities.

With regard to depreciation benefit, both finance ministry and Planning Commission are of the view that instead of giving 100% depreciation benefit in the first year itself, the same should be offered at 33% each for three consecutive years with unlimited loss carry-forward facility. The IT ministry had favoured depreciation of 100% because of high obsolescence of equipment used by the industry.

If the government approves net set of incentives in the semiconductor policy, it would give impetus to projects like that of SemIndia’s which is planning to invest $3 billion for setting up a semiconductor fab plant at Hyderabad. Global giants such as Intel and Texas Instruments are also looking at major investments in manufacturing of chips.

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