Sub-committee formed to resolve differences between ministries

KATHMANDU, OCT 30 - Amid differences between the Industry Ministry and Finance Ministry over tax-related provisions in the proposed Industrial Enterprises Act, the Cabinet has formed a sub-committee led by the Prime Minister’s Office Secretary Raju Man Singh Malla to settle the issue.

Other members of the panel include Industry Secretary Uttam Bhattarai and a representative from the Finance Ministry. The sub-committee has been asked to submit its report within a week.

Industry Minister Mahesh Basnet said the two ministries differed on the tax exemption provisions, and whether the Finance Act can reign over the proposed Act. “I had a dispute with Finance Minister Ram Sharan Mahat at the Cabinet’s Bill Committee meeting on Tuesday, as Mahat insisted the Finance Act should reign over the Industrial Enterprises Act,” he said.

Basnet said he stood for a system in which an entrepreneur should not follow many legal provisions of other Acts to do business. “A one-door policy is a must to encourage investment,” he said.

The Finance Ministry is also opposed to a provision in the proposed Act that small and cottage industries will get an income tax exemption for 10 years and registration fee waiver, according to Basent.

However, a Finance Ministry official said the Finance Act should have the supreme authority on tax-related matters as other Acts cannot be changed every year like the Finance Act. “We adjust the customs duty and other taxes every year through the Finance Act every year as per the need,” he said.

The official, however, said the Finance Ministry does not have reservations over the tax exemption provision.

The government presents the Finance Bill in the Parliament along with the budget every year, which either reduces or increases the tax rate. It usually increases the excise duty on tobacco and liquor products every year, and also adjusts the customs duties. The government has been also increasing the income threshold for income tax.

It has been more than three years since the first attempt was made to introduce the Industrial Enterprises Act. The Act is necessary to provide the facilities envisioned by the Industrial Policy introduced in 2010.

The proposed Act has provisions for facilitating micro, small and cottage industries and promoting women’s participation in industrial enterprises, according to Industry Ministry officials. The private sector has also been demanding the Act early introduction.

However, political instability and less priority accorded to the economic agenda have been delaying the Act.

Introduction of the Act is one of priorities of the incumbent government. Industry Secretary Uttam Bhattarai said they were making efforts to get the Cabinet’s clearance for bill and forward it to the Parliament as early as possible.