5-year tax holiday scheme to generate Rs5 lakh cr

5-year tax holiday scheme to generate Rs5 lakh cr

New Delhi:5-year tax holiday scheme extended in the 2008-09 budget for putting up hotels, health and education institutes, especially in Tier II and III cities is likely to spur investment opportunities of about Rs5 lakh crore and generate 50 million direct and indirect employment opportunities in nearly 750 cities by the end of the 11th Five Year Plan, according to Assocham.

The lead sector for investment and employment generation as the scheme takes off would be hotels followed by education and health institutions since demand would be more for hotels and that too in prime locations of these cities.

The scheme will get popularized and would increase Gross Domestic Produce of various states and union territories by a minimum of 4% and catapult infrastructure and civic amenities of about 750 townships that fall under Tier II and III cities. These findings were based on a survey carried out amongst Assocham membership post budget.

Each state and union territory is likely to garner investment volume of nearly Rs666 crore in new hotels, health and educational institutes with 5-year tax holiday schemes, as it would further push up decencentralization of economic activities, which is already under way.

Companies like TCS, Wipro and Genpact have already started moving out of metros and large cities and have opened branches in state capitals and lead sites. Tax holidays will intensify this process over the next five years.

70% CEOs felt that of the projected Rs5 lakh crore investments about Rs2.75 lakh crore would go to hotel sector alone because of demand factor for which states and UT governments would have to allocate land and sites to developers and prime locations and create 20 million odd job opportunities.

However, the health sector would fall in the lowest category for attracting investments as in the budget announcements it has been made amply clear that those investors that wish to avail of the 5-year tax incentives would have to serve rural people.

This might discourage prospective investors initially as the clause would not encourage investors to go in and serve the rural population and therefore it is suggested that public investments must be increased to serve the rural masses by way of putting up chains of health institutions.

Over 75% CEOs held that there would be a huge migration of students seeking to build a professional career as they shifted towards metros and therefore investors would like to cash in on the holiday tax incentive scheme and put up chains of such institutions in these cities as they generated over Rs2.5 crore of investment opportunities and job opportunities for minimum 15 million workforce.