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Excise exemption to Himachal Pradesh and Uttarakhand under review

Himachal Pradesh and Uttarakhand, the two Himalayan states which have drawn thousands of crores of investments due to the tax benefits they offer, stare at the possibility of losing the status as Finance Minister Pranab Mukherjee looks to plug loopholes and boost revenues for a government that’s on a spending spree.

Himachal Pradesh and Uttarakhand, the two Himalayan states which have drawn thousands of crores of investments due to the tax benefits they offer, stare at the possibility of losing the status as Finance Minister Pranab Mukherjee looks to plug loopholes and boost revenues for a government that’s on a spending spree. “Excise exemption to these two hilly states is under review,” said a government official who did not want to be identified. “A final decision would be taken by Prime Minister on the issue.”

Mr Mukherjee who has spent record funds this year to revive economic growth may rollback at some fiscal stimulus measures in the coming budget and also withdraws some special tax exemptions as he pushes for a friendly goods and services tax.

Investments in these two states were exempted from excise duty as a special case to push growth in the economically backward regions which some say were misused. These exemptions lapse in March 2010, unless extended.

Hindustan Unilever, makers of Dove and Lifebuoy soaps and motorcycle maker Hero Honda are among scores of enterprises that have invested in the two states and shown high profitability that boosted their share prices.

If the exemption is not extended, many companies which planned to invest in those states may not do so. The governments of these states have already written to the Prime Minister lobbying for an extension. These exemptions were criticised for many reasons — misuse, flight of capital from neighbouring states and skewed development in states.

So, to minimise the damage, the government tinkered with rules last year as it tightened the eligibility norms for availing excise exemption in these states. Companies that carried out labelling, packaging or sorting instead of manufacturing were no longer eligible for the tax holiday.

The various area-based tax exemptions are estimated to have led to revenue loss of over Rs 10,000 crores this fiscal year to the government, hence there is a move to reverse some of them.

Units in Himachal and Uttarakhand that start their commercial production before March 31, 2010, enjoy 100 per cent excise exemption. The period of exemption from the start of the date of commercial production and is available for 10 years.

However, all investments made up to March 31, 2010, will continue to enjoy the benefits for 10 years even if the 100 per cent excise holiday is allowed to lapse.

Categories: Excise Duty

View Comments (13)

  • Sir
    IF we take over a manufacturing unit in BAADI , established before 31st march 2010.& availing central excise exemption benefit for 10 year period,Unit name & product will be changed by us( Buyer ), Please guide, whether new unit will be eligible for excise exemption?
    Please also inform me about the other benefits in BADDI (Himachal Pradesh) such as VAT,Income Tax,Subsidy, Octroi etc.
    For your information we are proposing to manufacture Plastic Household & Thermoware products so kindly give your suggestion at the earliest

  • raj pal sharma
    Dear Sir,

    What the following information:-
    1) Exemption policies for company at himachal Pradesh tax free zone: VAT , Central Excise, CST, GST , Freight and Transport, Raw-material Purchase, Income Tax.

    2) Tabulated Benefits given to company in himachal pradesh with installed capacity. What formalities has to be completed, if company increases the capacity. What are the benefits given to company till date and what are their expiry dates. What benefits company still need to apply for.

    3) What are conditions and constraints if the industry expands their capacity or increase their production capacity in himachal pradesh.

    4) What is the Effect of expansion of company with regard to Exemption policies and benefits and documentation.

    5) Is Freight subsidy available. If available how much % and what are the conditions applicable.

    6) What are the Excise Exemptions Constraints for company in himachal pradesh.

    7) Grid to be prepared department wise with regard to Exemptions for company. (DIC, VAT, Central Excise, CST, GST, Labour department,

    Regards
    Altaf Ahamed

    Amit barnwal says:
    February 11, 2010 at 10:43 AM
    yes our primeminister must extend this excise benifit for this two states.they need this benifit to devlop their state very well.if they received 3years more time,they will be abel to change their state and they will not look for central to more help time to time.
    That’s all.

  • Dear Sir

    May I know what was the Income Tax policy for Washing Soap manufacturing units which started its production before 31st March 2010.Industry department says that 100% exemption of Income Tax is there.Is it true?Kindly reply urgently.

    Thanx N Regards
    Ajay

  • Dear Sir

    May I know what was the Income Tax policy for Washing Soap manufacturing units which started its production before 31st March 2010.Industry department says that 100% exemption of Income Tax is there.Is it true?Kindly reply urgently.

    Thanx N Regards
    Ajay
    Cell 9816056298

  • Dear, i have the requirement for Solar PV Cable AJV 120 Sq mm. i want to purchase from excise free zone. can you please guide me which excise zone free city is near to gujarat and is there any manufacturing company for Solar pv cable.

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