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Tax reliefs to pave way for opening up retail trade

Gargi Parsai

NEW DELHI: Paving the way for further opening up of retail trade including the food sector, the Union Finance Minister Pranab Mukherjee announced a series of tax concessions for the farm-to-market initiative in his budget proposals for 2010-11.

While focussing on spurring growth in the farm sector and reducing wastage of farm produce, Mr. Mukherjee announced enormous tax reliefs on setting up cold chains, refrigeration units, processing units and on agricultural machinery not manufactured in India.

By quoting in his budget address the Prime Minister’s recent speech that emphasised “the need to take a firm view on opening up of retail trade,” Mr. Mukherjee formalised the government’s intent on the issue.

For farmers he announced an interest subvention of additional one per cent on short-term crop loan for timely payment taking the effective rate of interest for this category of loan to five per cent.

As a part of the farm-to-market initiative, he announced the availability of External Commercial Borrowings for cold storage or cold room facility, including for farm-level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat. For this changes in the definition of infrastructure under ECB policy would be made.

Outlining the objectives in his budget speech, the Finance Minister said a focussed attention was required to create a strong supply chain for perishable farm produce, setting up infrastructure facilities for value addition and infusion of technology to augment farm output. Similar facilities were needed to be provided for apiary, horticulture, dairy, poultry, meat, marine and aquaculture.

To achieve these objectives the Finance Minister proposed concessional import duty of five per cent for setting up of mechanised handling systems and pallet racking systems in mandis or warehouses for food grains and sugar and full exemption from service tax for installation.

Import status would be given at a discounted customs duty of five per cent with full service tax exemption to the initial setting up of cold storages, cold rooms including farm pre-coolers and to processing units for such produce. The Finance Minister announced discounted customs duty of five per cent to specified agricultural machinery not manufactured in India, Central excise waiver to trailers and semi-trailers and specified equipment for preservation, storage and processing of farm and related sectors.

Recognising that service tax was contributing in a big way to inflationary pressures, the Finance Minister exempted from this tax storage and warehousing of farm produce, testing and certification of seeds and road transportation of cereals and pulses.

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