Govt considers lowering end-use exemptions

The finance ministry is considering a proposal to rationalise end-use exemptions granted to businesses through various duty reliefs.

Based on a recommendation from the Central Board of Excise and Customs, the ministry will either trim the list of exemptions or put in place stringent conditions for companies to avail of the benefits, an official close to the development said.

The end-use exemptions are a part of duty reliefs granted to exporters and importers. They are in the form of zero import duty, export duty, countervailing duty or special additional customs duty on imports and exports, provided the goods are imported and exported for a specified end-use.

In order to conform with the end-use conditions, the government has laid down terms and conditions for the items covered through a 2002 notification.

Tax officials said the removal of the exemptions could also help augment revenue. These exemptions might be wound up in phased manner, starting with certain industries that have already started showing signs of revival or products that are non-essential in nature.

The review of the exemptions on the indirect taxes side comes with the expectation of a phased rollback of the stimulus provided to the industry in 2008 to cope with the economic downturn.

An increase in excise duty will also raise the customs burden to the extent of a higher countervailing duty.