Centre in dilemma over tax holidays to Northeast states

Even as key Northeast states like Tripura and Meghalaya are gearing up for polls next year and the BJP keenly eyeing an opportunity to create space for itself there, the Centre is struggling to find ways to give tax holidays to the hill states in the Northeast industrial policy which is under preparation, owing to the implementation of the GST regime.

According to highlyplaced sources, all northeastern states have repeatedly been requesting the Centre to provide them with tax holidays in the new policy, especially for setting up small scale industries. However in the post-GST regime, the government is finding it hard to come up with a solution to their demand.

The main problem being faced by policymakers, sources said, is that with GST being an overarching monolithic indirect tax, post its implementation, there is no scope left for giving any subsidy to any sector which was the case during the pre-GST days when subsidies, waivers and tax holidays were possible.

Top sources confirmed that even though the Northeast industrial policy is in the works for the past almost six months, it is the vexed issue of states from that region seeking tax holidays for various sectors, which is stalling its formulation and efforts are on to arrive at a solution without wasting any further time.

The previous Northeast industrial policy had ended in March 2017 after it had come into force in 2007.

Sources added that while the Cabinet note for the new Northeast industrial policy is being finalised, the tax holiday issue needs to be resolved before moving ahead with it.