Tax Benefits for Cold Chain Facility Business

Agriculture employs over 50% of total work force in India. Even being second in terms of agricultural produce in world ranking, a large portion of such produce is lost. To develop a better infrastructure connecting chain for preserve agricultural produce and to make the Business of Cold Chain facility more attractive to entrepreneurs Government has provided few Tax benefits.

Here we have tried to discuss tax benefits available to entrepreneurs, to know more about benefits such as financial aid and grant read our other article on Starting Cold Chain Facility Business in India and its Benefits

Goods and Services Tax Benefit:

Supply of Cold Storage Services for agricultural produce is exempted under the Goods and Services Tax act and there is no requirement to pay GST on such services.

Income Tax Benefit:

The Income Tax Act under section 35AD provides a flat deduction of 100% of amount expended towards setting up of the Cold Chain facility in the previous year in which such amount is expended.

What expenditure is covered under such deduction?

All capital expenditure for setting up the Cold Chain Facility after the commencement of business shall be allowed as 100% flat deduction in the same previous year.

What expenditure is not covered under such deduction?

Following capital expenditure shall not be allowed as deduction as per this section:

• Cost of acquisition of land
• Cost of Goodwill acquired if any
• Cost of Financial Instrument if any

Who is eligible for such deduction?

Any person carrying on the business of cold chain facility in India can claim such deduction, which includes all type of entities such as proprietorships, Partnerships, Limited Liability Partnerships, Companies etc.

What are the conditions to claim such deduction ?

Following are the conditions are required to be fulfilled to claim the deduction in Income Tax:

• Capital Expenditure should be spent by a new business and not by a business formed by splitting up or reconstruction of an existing entity.
• The amount should be spent on new plant and machinery only with the following exceptions:
  • 20% of machinery can be old Plant and Machinery
  • Old Plant & Machinery will be treated as new of such asset was imported to India and has not in any previous year used in India and no assesse has claimed any depreciation or deduction on such machinery already.
• Books of accounts has to be audited to claim such deduction.

Can we claim depreciation on such expenditure?

No since a flat deduction of 100% is allowed in the previous year itself no deprecation will be allowed under Income Tax later.

To know more about how you can plan and save your taxes you can reach our experts at +91-7008804070