Arun Jaitley with law minister Ravi Shankar Prasad in New Delhi on Wednesday. (PTI)
New Delhi, Aug. 16: Industries in the northeastern and Himalayan states will continue to get tax exemption till March 2027, albeit as refund, under the current GST regime which was rolled out on July 1, finance minister Arun Jaitley said today.
"Within the framework of the GST Act each industry will be entitled to its own refund mechanism during this particular period (till March 31, 2027)," he said.
The cabinet committee on economic affairs, chaired by Prime Minister Narendra Modi, has approved the scheme to provide budgetary support under the goods and service tax (GST) to eligible industrial units in Jammu & Kashmir, Uttarakhand, Himachal Pradesh and northeastern states, including Sikkim, he said.
The support shall be available for the residual period (10 years from the date of the commercial production) in the Northeast and Himalayan states.
The DIPP will notify the scheme, including the detailed operational guidelines for its implementation within six weeks.
Under the new GST regime, there is no provision for exemption but there is one section under the act which permits refunds.
The move will benefit 4,284 units, including big names such as Cipla, Dabur, Dr Reddy's, Patanjali, Marico and TVS Motors.
The industry ministry, which piloted the move, said: "Budgetary support of Rs 27,413 crore for the scheme has been approved for the period between August 1, 2017 and March-end 2027."
The cabinet note for the move explained that the refund scheme was formulated after it was realised that with GST being ushered in "all entities exempted from payment of indirect tax shall not continue (to get the benefit of these exemptions) and shall (have to) pay tax under the GST regime".
Officials said the government was implementing its North East Industrial and Investment Promotion Policy (NEIIPP), 2007 for northeastern states, including Sikkim, and a package for Special Category States, which included Jammu & Kashmir, Uttarakhand and Himachal Pradesh to promote industrialisation in these states.
One of the benefits of NEIIPP, 2007 and Package for Special Category States was excise duty exemption for the first 10 years after commercial production started.
"A large number of firms had invested in Assam in order to get benefits of this scheme. In all some Rs 6,500 crore were invested in Assam in the last one year with Patanjali alone investing some Rs 1,300 crore, while Hindustan Unilever put in another Rs 1,000 crore," said officials.
States are yet to take a call on their portion of the levy or the state GST .
The cabinet committee decision comes just four days ahead of the deadline of August 20 by when companies have to pay the GST. Officials said in case they have already started paying the GST, they could claim refunds.
The decision can be taken under discretionary powers left to the central government by the GST Council regarding such incentives, officials said. Officials said the refund will be calculated after deducting input credit, if applicable. All refund proposals will have to be filed electronically and will be paid within a month.
The cabinet today decided to set up a high-powered committee of Union ministers to expedite strategic divestment of state-owned companies.
The cabinet gave its nod for setting up an "alternative mechanism" consisting of the finance minister, the road transport and highways minister and the minister of the administrative department to decide on the matters relating to strategic divestment, a statement said.