Centre to compensate units that lost excise-exempt status, post GST

Over 4,250 manufacturing units located in the north-eastern and Himalayan States are to get a Diwali gift from the Centre.

The Government will, according to a scheme framed by the Department of Industrial Policy and Promotion, provide a budgetary support of ₹27,413 crore for 4,284 units over July 1, 2017 till March 31, 2027 to recompense them for losing their excise duty-exempt status post GST implementation from July 1.

The Government has framed the operational guidelines for the scheme, which has been announced under two months of its promising relief to the units. The budgetary support is being provided as a “goodwill measure” and only to units that were eligible to draw excise duty exemption benefits.

The scheme — for units based out of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and the North-East, including Sikkim — will be limited to the tax that accrues to the Centre under the Central Goods and Services Act, 2017 and the Integrated Goods and Services Act, 2017, after devolution of a part of the levy to the States, in terms of Article 270 of the Constitution.

The amount of budgetary support to an eligible unit will be the sum of: 58 per cent of the CGST paid by the unit after utilisation of the input tax credit of the central tax and integrated tax, and 29 per cent of the IGST paid by the unit after utilisation of input tax credit of the central and integrated taxes.

According to sources, this 58 per cent has been fixed taking into consideration that the Centre devolves 42 per cent of the taxes on goods and services to the States as per the recommendations of the Fourteenth Finance Commission.

Commenting on the scheme, Abhishek Jain, Tax Partner, EY, said the scheme framed in lieu of the excise exemption seeks to restrict the benefit to 58 per cent of the central tax component paid in cash after utilising input credits.

“This is a significant reduction in the benefit compared to the earlier regime wherein 100 per cent of the excise duty to be paid in cash was exempt or refunded,” Jain said.

Also, in the case of job work arrangements, the benefit would be restricted to 58 per cent of the central tax paid on the job work charges and not on the value of the goods, he added.

The budgetary support would be disbursed by the Department of Industrial Policy and Promotion (DIPP) in the Commerce and Industry Ministry.

All eligible units would have to register on the ACES-GST portal and obtain an unique ID, which is to be used for processing of all claims under the scheme.

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