New Delhi: In what should prove to be a big boost for manufacturing at India’s export-oriented units, the commerce ministry has recommended to its finance counterpart that the “sunset clause" under section 10B of the Income-Tax (I-T) Act be removed.

Export-oriented units are entitled to 100% exemption from income-tax under Section 10B of the I-T Act, 1961, for 10 years. These benefits will end on 31 March 2010.

Big boost: A Honda car plant in Surajpur, UP. Export-oriented units can get 100% income-tax exemption under section 10B for 10 years. Ramesh Pathania / Mint

The proposals, which have been formally mooted by the commerce ministry as part of its pre-budget proposals, could end the uncertainty for export-oriented units, which carry out manufacturing activities at “customs bonded" premises.

The software industry has also sought a five-year extension beyond 2010 for the tax holiday.

In its wish list of demands for inclusion in the Budget, the commerce ministry has pointed out that export-oriented units pay a variety of indirect taxes to state governments and local bodies.

It has suggested removing the sunset clause to offset this disadvantage.

The ministry has also sought that the definition of “manufacturing" in Section 10B of the I-T Act be aligned with that in the Foreign Trade Policy.