The Andhra Pradesh Small Scale Industries (Restriction on Sales Tax Holiday) Act, 1995.
1

**THE ANDHRA PRADESH SMALL SCALE INDUSTRIES (RESTRICTION ON**
**SALES TAX HOLIDAY) ACT, 1995**

**(ACT NO. 14 OF 1995)**

**ARRANGEMENT OF SECTIONS**

**Sections**

**1. Short title and commencement**
**2. Restriction on Sales Tax Holiday**


-----

2

**THE ANDHRA PRADESH SMALL SCALE INDUSTRIES (RESTRICTION ON**
**SALES TAX HOLIDAY) ACT, 1995**

**(ACT NO. 14 OF 1995)**

(16[th] February, 1995)

**AN ACT LIMIT THE MAXIMUM FIXED CAPITAL INVESTMENT FOR THE**
**PURPOSE OF SALES TAX HOLIDAY IN RESPECT OF CERTAIN SMALL**
**SCALE INDUSTRIES IN THE STATE OF ANDHRA PRADESH.**

Whereas the Government in G.O.Ms.No.498, Industries and Commerce
(I.A) Department, dated the 16[th] October, 1989 issued orders extending certain
concessions under the Liberalised State Incentive Scheme for setting up of new
Industries in the State of Andhra Pradesh, except in the Industries specified in
the Annexure to the order and those to be located in the Municipal Corporation
limits of Hyderabad, Visakhapatnam and Vijayawada;

And whereas, concession of five years Sales Tax Holiday subject to a
ceiling of rupees thirty five lakhs on Sales Tax during the entire holiday period
has been allowed to the small scale in industries to be set up on or after the 3[rd]
October, 1989 and going into commercial production before the 31[st] March,
1995;

And whereas, it has been brought to the notice of the Government that
there is every likelihood of under exploitation of the concession of the Sales Tax
Holiday of rupees thirty five lakhs allowed in the aforesaid G.O., by some of the
units with every small fixed capital investment but with high turnover by virtue
of components bought out;

To AND whereas, while approving the comprehensive guidelines for
effective implementation of the Incentive Scheme issued in
Memo.No.2125/IA/89, Industries and Commerce Department dated 15-091990 it has been made clear in para 6 (2) (B) (ii) of the aid guidelines that small
scale industries are exempted from payment of Sales Tax for a period of five
years from the date of commercial production limited to 100% of fixed capital
investment or rupees thirty five lakhs whichever is less;

AND whereas, the demand notices for payment of Sales Tax in
accordance with the guidelines evolved were issued to certain all scale
industries;

AND whereas, the said small scale units have challenged the said
demand notices in the High Court of Andhra Pradesh on the pretext that they
are eligible for the Sales Tax Holiday benefit up to a maximum of rupees thirty
five lakhs in accordance with the orders issued in the said G.O., irrespective of
that capital investment;

AND whereas, in W.P.No.16570/91 and batch the High Court of Andhra
Pradesh, while upholding the contention of the petitioners, directed not to
demand or collect Scales Tax from the petitioners except as otherwise provided


-----

3

in the said G.O.;

AND whereas, the intention of the Government is only to allow the small
scale units a Sales Tax Holiday to an extent of 100% of their capital investment
or a maximum of rupees thirty five lakhs whichever is less during the entire
holiday period vide para 6-B (ii) of the guidelines issued in Memo
No.2125/IA/87-1, dated the 15[th] September, 1990 for implementation of the
Liberalised State Incentive Scheme, 1989;

AND whereas, the High Court of Andhra Pradesh in W.P.No.16570/91
and batch held that limiting the extent of eligibility to a sum lesser than rupees
thirty five lakhs could have been effected only by another notified order issued
under clause (2) of article 166 of the Constitution rather than by a
Memorandum and held that the respondent are not entitled to rely upon the
alteration or reduction in the eligibility of the petitioners for exemption to any
amount lesser than that which was promised in clause 3 of G.O.Ms.No.479,
Industries and Commerce (I.A.) Department dated 16-10-1989;

AND whereas, the implementation of the said directions of the High
Court would run against the policy of the Government and it amounts to
allowing the small scale units with less capital investment and high turnover,
taking undue advantage of the policy of the Government [1][and also amount to
allow the ineligible Small Scale Industries specified under Annexure to
G.O.Ms.No.146, Industries and Commerce (IA) Department, dated the 25[th]
April, 1991 for availing the incentives];

AND whereas, the implementation of the Judgement of the High Court
would result in the colossal loss of revenue to the Government;

Be it enacted by the Legislative Assembly of the State of Andhra Pradesh
in the Forty-sixth Year of the Republic of the India, as follows:
**1. Short title and commencement - (1) This Act may be called the Andhra**
Pradesh Small Scale Industries (Restriction on Sales Tax Holiday) Act, 1995.

2[(2) It shall be deemed to have come into force on the 3rd October, 1989.]

3[2. Restriction on Sales Tax Holiday - Notwithstanding the restrictions
specified under para-3B of the G.O.Ms.No.498, Industries and Commerce (IA)
Department, dated the 16[th] October, 1989, or anything contained in any
judgement, decree or order of any Court, Tribunal or other authority or any
order to the contrary, the Small Scale Industries which complied with the
conditions stipulated in G.O.Ms.No.498, Industries and Commerce (IA)
Department, dated the 16[th] October, 1989 and Government Memo
No.2125/IA/89-1, dated the 15[th] September, 1990, shall be entitled to a Sales

1 . Added by the Act No.18 of 1996, Section 2.
2 . The sub-section (2) substituted by the Act No. 18 of 1996, Section 3.
3 . The Section 2 substituted by the Act No. 18 of 1996, Section 4.


-----

4

Tax Holiday limited to 100% of the fixed capital investment or Rs.35.00 lakhs
(Rupees thirty five lakhs) whichever is less, for a period of five years in respect
of the Small Scale Industries set up on or after 3[rd] October, 1989 and go into
commercial production before the 31[st] March, 1995 in the State of Andhra
Pradesh except the Industries specified in the Annexure to the G.O.Ms.No.498,
Industries and Commerce Department, dated the 16[th] October, 1989 and the
industries located in the Municipal Corporation limits of Hyderabad,
Visakhapatnam and Vijayawada.]


-----

