STRATEGIC MANAGEMENT

INDUSTRIAL LICENSING POLICY

Industrial Licensing is governed by the Industries (Development & Regulation) Act,
1951. Industrial licensing policy and procedures have also been liberalised from time
to time. A full realisation of the industrial potential of the country calls for a
continuation of this process of change.

Industrial policy means rules, regulations, principles, policies and procedures laid
down by government for regulating, developing and controlling industrial
undertakings in the country.

It prescribes the respective roles of the public, private, joint and co-operative sectors
for the development of industries.

It also incorporates fiscal and monetary policies, tariff policy, labor policy and
government attitude towards foreign capital, and role to be played by multinational
corporations in the development of the industrial sector.

Government of India has formulated policies for industrial growth and development.

Objectives of Industrial Policies:

• Achieving a socialistic pattern of society.

• Achieving industrial growth.

• Achieving economic growth.

• Developing heavy and capital goods industry. .

• Providing opportunities for gainful employment.

• Alleviating poverty.

• Achieving a self-sustained economy.

• Protecting and developing a healthy small-scale sector.

• Updating technology and modernization.

• Liberalization and globalization of economy.

Industrial licensing is compulsory for following
industries
1. For Large and Medium Industries: Items reserved for the Small Scale Sector

2. For All Industries: All items of electronic aerospace and defence equipment,
related to the production or use of atomic energy including the carrying out of any
process, preparatory or ancillary to production or use, under Atomic Energy Act,1962.

MRTP ACT

The Monopolies and Restrictive Trade Practices Act, 1969, aims to prevent
concentration of economic power to the common detriment, provide for control of
monopolies and probation of monopolistic, restrictive and unfair trade practice, and
protect consumer interest.

Monopolistic trade practice:

Monopolistic trade practice is that which represents abuse of market power in the
production and marketing of goods and services by eliminating potential competitors
from market and taking advantage of the control over the market by charging
unreasonably high prices, preventing or reducing competition, limiting technical
development, deteriorating product quality or by adopting unfair or deceptive trade
practices.

Unfair Trade Practice:

• Misleading advertisement and False Representation

• Falsely representing that goods and services are of a particular standard,

quality, grade, composition or style.

• Falsely representing any second hand renovated or old goods as new.

• Representing that goods or services, seller or supplier has a sponsorship,

approval or affiliation which they do not have.

• Making a false or misleading representation concerning need for, or usefulness

of goods or services.
 • Giving to public any warranty, guarantee of performance that is not based on
an adequate test or making to public a representation which purports to be such
a guarantee or warranty.

• False and misleading claims with respect to the price of goods or services.

• Giving false or misleading facts disparaging the goods, services or trade of

another person or concern.

Restrictive Trade Practice:

To maximise profits and market power, traders often attempt to indulge in certain
trade practices which tend to obstruct the flow of capital into the stream of production.
It may also bring manipulation of prices or conditions of delivery or affect the flow of
supplies in the market so as to impose unjustified costs.

VAT
Value Added Tax (VAT) is a general consumption tax that is assessed on the value
added to goods & services. It is the indirect tax on the consumption of the goods, paid
by its original producers upon the change in goods or upon the transfer of the goods to
its ultimate consumers. It is based on the value of the goods, added by the transferor.
It is the tax in relation to the difference of the value added by the transferor and not
just a profit.

It means every seller of goods and service providers charges the tax after availing the
input tax credit. It is the form of collecting sales tax under which tax is collected in
each stage on the value added of the goods. In practice, the dealer charges the tax on
the full price of the goods, sold to the consumer and at every end of the tax period
reduces the tax collected on sale and tax charged to him by the dealers from whom he
purchased the goods and deposits such amount of tax in government treasury.

VAT is a multi-stage tax, levied only on value that is added at each stage in the cycle
of production of goods and services with the provision of a set-off for the tax paid at
earlier stages in the cycle/chain. The aim is to avoid 'cascading', which can have a
snowballing effect on the prices. It is assumed that because of cross-checking in a
multi-staged tax; tax evasion would be checked, hence resulting in higher revenues to
the government.
Under the VAT system, no exemptions are given and a tax will be levied at every
stage of manufacture of a product. At every stage of value-addition, the tax that is
levied on the inputs can be claimed back from tax authorities.

Items covered under VAT

All business transactions that are carried on within a State by individuals/partnerships/
companies etc. will be covered under VAT.

More than 550 items are covered under the new Indian VAT regime out of which 46
natural & unprocessed local products will be exempt from VAT

Nearly 270 items including drugs and medicines, all industrial and agricultural inputs,
capital goods as well as declared goods would attract 4 % VAT in India.

The remaining items would attract 12.5 % VAT. Precious metals such as gold and
bullion will be taxed at 1%.

Petrol and diesel are kept out of the VAT regime in India.