Azad takes up sop exemption issue with PM

NEW DELHI: The Centre���s move to restrict area-based excise exemption benefits in Jammu & Kashmir, Kutch and the North-East has drawn the ire of the concerned state governments. Jammu & Kashmir chief minister Ghulam Nabi Azad has taken up the issue with prime minister Manmohan Singh. In a letter to the prime minister, Mr Azad has sought reinstatement of the benefits pointing at the impact of the move on the industry in the state.

The Centre���s special area-based exemption package, aimed at encouraging investments in specific region, is applicable in hill states of North-East, Uttarakhand, Himachal Pradesh and J&K. All manufacturing units set up in these regions between 2003 and 2010 are exempt from excise duty for 10 years and income tax for the first five years, followed by a 50% income tax waiver in the remaining five years.

While in the case of Himachal and Uttarakhand, there is a complete waiver and the manufacturers do not pay any duty at all, in the case of North-East, J&K and Kutch, the benefit is provided through duty rebate.

The decision to restrict the sop was taken by the Cabinet. Subsequently, the Central Board of Excise and Customs (CBEC) had on March 28 issued a notification which restricts the excise exemption benefit only to value addition carried in the state.

The government has provided rates at which the rebate would be in relation to the value-addition specified with the item. A large number of FMCG, pharma and metal companies which had set up units in these states are understood to be bearing the brunt of the move.

The area-based excise exemption is prone to rampant misuse and the CBEC move was primarily aimed at plugging the loophole to allow only genuine manufacturers to avail the benefit.