Finance ministry imposes restrictions on excise duty in North East
Ramesh Shankar, Mumbai

Close on the heels of the excise restrictions in Jammu and Kashmir, the union finance ministry has imposed restrictions on excise duty relief benefits for the North East region as granted in the special North-East Industrial Policy aimed at facilitating setting up of industries in the industrially backward region.

There are several pharmaceutical companies that have set up their units in the north eastern state of Sikkim to take benefit of the tax exemptions announced by the central government. According to industry sources, among the tax holiday destinations in the country, Sikkim comes third after Himachal Pradesh and Uttarakhand as far as the maximum concentration of pharmaceutical companies are concerned.

In the Central Excise Tariff notification, the finance ministry has withdrawn the total exemption of excise duty paid from the personal ledger account (PLA) and allowed exemption only up to 56 per cent of total excise duty. The rates of exemption would now vary from sector to sector.

Meanwhile, many in the industry apprehend that it could be a possible precursor to the ultimate excise withdrawal from the other excise free zones like HP and Uttarakhand where the concentration of pharma industry is more than any other industry. In these states, the excise duty is fully exempted and any dilution in excise duty 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.

Recently, the finance ministry had amended the incentive package to J&K restricting the excise refund benefits only on value addition which in practical terms means withdrawal of excise benefits to the industry as the value addition in the industry is just 5-10 per cent.

According to sources, the government's action midway through a tax holiday scheme is prompted by the huge revenue loss. According to a rough industry estimate, the latest finance ministry notification on North East will affect excise duty refund to the tune of Rs 700 crore.

Source: www.pharmabiz.com
10th April 2008

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