Centre rejects extension of excise exemption

It is now official that the goods and service tax (GST) has thrown a spanner in the demand for the extension of the excise exemption under the Concessional Industrial Package (CIP) for industries in Uttarkhand and Himachal Pradesh.

With the BJP governments in Himachal and Uttarakhand pitching for the extension, Union Finance Minister Pranab Mukherjee has firmly rejected the demand saying the excise sops cannot be extended since GST is coming into force from next year. The letter is addressed to Chief Minister Ramesh Pokhriyal Nishank, Principal Secretary, Industries, P C Sharma said.

Uttarakhand is busy to draft the reply. “We are shortly sending a reply to the letter from the finance minister,” said Sharma. The letter which is being drafted by Nishank highlights the benefits of excise exemptions saying the sops are necessary for the hill state where geographical conditions are different from other states. Nishank’s letter also focuses on the fact that such exemption has already been extended for Jammu and Kashmir and north-eastern states where a similar tax holiday scheme existed.

Significantly, Mukherjee’s letter came at a time when the BJP has already announced a high-level party delegation comprising its top leaders would call on Prime Minister Manmohan Singh to seek the extension of the CIP.

Leader of the opposition Sushma Swaraj last month said in Dehra Dun the party has sought time from the Prime Minister over the issue. The delegation comprises senior party leader L K Advani, BJP president Nitin Gadkari, Swaraj and chief ministers of both Himachal Pradesh and Uttarakhand. Nishank and Dhumal had also held a series of meetings with the Prime Minister over the issue in the recent past. The area-based exemptions expired on March 31 after the centre decided to bring GST from next year.

Top officials here maintained that since the Centre has already extended the benefits of excise beyond 2011 to Jammu and Kashmir and north eastern states, they can also be extended to Himachal Pradesh and Uttarakhand.

Excise rebate is the main component of the CIP especially in Uttarakhand where industries were given cent percent exemption for a period 10 years after the production.

The CIP announced by former Prime Minister Atal Behari Vajpayee created an industrial boom in Uttarakhand with top-notch companies like Britannia, Nestle, HUL, Hero Honda, Tata Motors setting up units in the hill state. The state government is of view that the investments worth over Rs 32,000 crores which were in pipeline had been affected by the expiry of the CIP.