The Department of Industrial Promotion and Policy (DIPP) has notified a scheme to extend budgetary support to manufacturing units operating in the backward areas of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North-Eastern states including Sikkim (Scheme) which were availing central excise benefits under the erstwhile area-based exemption notifications under different Industrial Promotion Schemes of the Government of India. The Scheme shall continue only for the residual period (10 years from the date of commencement of commercial production) for which each of such manufacturing units are eligible.
Eligibility
Units which were eligible and availing area based exemption by way of ab-initio exemption or refund of central excise duty under the erstwhile excise notifications immediately before 1 July 2017 shall be eligible for the budgetary support under the Scheme.
Amount of budgetary support
The amount of budgetary support under the Scheme would be sum of:
- 58% of Central Goods & Services Tax (CGST) paid in cash after utilisation of the Input tax credit of the CGST and Integrated Goods & Services Tax (IGST); and
- 29% of the IGST paid in cash after utilisation of the Input tax credit Tax of the IGST and CGST.
Procurement of goods from a composition dealer would further reduce the amount of budgetary support.
Limitations and conditions
- Eligible units shall be required to first utilise input tax credit of CGST and IGST;
- Payment of the budgetary support would be made on quarterly basis;
- Units found to over-state production or any mis-declaration to claim higher budgetary support would be black listed.
Comment
The much-awaited Scheme to replace the area based exemption notification is expected to give partial relief to the manufacturers who have set up units in such industrially backward zones by committing significant capital investment. However, such units are likely to witness working capital stress due to withdrawal of self-credit and delays in pay-outs. Also, the rates of refund prescribed may only provide marginal benefit considering there may be excess value addition in case of certain specified products. It is to be seen if this Scheme will attract litigation due to premature curtailment of benefits promised in the erstwhile regime.
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