Govt amends excise exemption policy in J&K by restricting it only on value addition
Ramesh Shankar, Mumbai

In what is seen in the industry circles as a possible precursor to the eventual withdrawal of excise benefits in the tax free states of Sikkim, Himachal Pradesh and Uttarakhand, the Union finance ministry has amended the incentive package to units in J&K by restricting the excise refund benefits only on value addition. According to industry estimates, the value addition in the industry is just around 5-10 per cent, which in practical terms means withdrawal of excise benefits to the industry.

The government's action midway through a tax holiday scheme is prompted by the huge annual revenue losses to it. In 2006-07, out of the total Rs 1003 crore it collected from the J&K circle, the government had to refund Rs 820 crore to the industry under the excise refund scheme. In J&K, the industry would pay the duty and then claim the refund. There are around 50 pharma units in the region.

Meanwhile, there are apprehensions in the industry that it could be a possible precursor to the ultimate withdrawal of excise duty from all other tax free zones like HP, Uttarakhand and Sikkim where the concentration of pharma industry is more than any other industry. In these states, the excise duty is fully exempted and the imposition of tax exemption on value addition will take away the sheen from these areas. According to industry experts, though all other benefits remain, every single incentive other than the excise holiday makes the entire package totally meaningless.

Industry sources said that as J&K being a more backward state, it is the most deserving state among backward states and if the government has withdrawn exemption there, then Himachal and Uttarakhand cannot be far behind.

Many in the industry feel that the finance ministry has already laid the revenue infrastructure by asking the industry in HP and Uttarakhand to file excise returns, which otherwise they were not supposed to do.

A notification in this regard, which came close on the heels of the government notification withdrawing excise sops to the peripheral activities like packaging, storage and labelling, has lent credence to the apprehension of the industries that the government is testing the waters to ultimately withdraw excise sops.

Source: www.pharmabiz.com
1st April 2008

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