NEW DELHI: The Finance Ministry is likely to move a proposal in the Union Cabinet on refund of goods and services tax (GST) on items made in the North East, Himachal Pradesh and Uttar Pradesh, which were excise-free zones before the new tax regime.
The Expenditure Finance Committee has approved the scheme and the Department of Industrial Policy and Promotion, which anchors it, will move the proposal soon for Cabinet approval, sources said.
Such exemptions have largely been scrapped under GST to create a common market across India. If approved, it will come as respite for the states.
The northeastern states have voiced their displeasure over withdrawal of tax exemptions in the region. Many companies in the cement sector have plants in such zones.
The move will also benefit fast-moving consumer goods (FMCG), automobiles and pharmaceutical companies which have invested in these zones because of the tax break.
The scheme proposes to refund 58 per cent of the central GST paid by manufacturers in the erstwhile excise-free zones of Himachal Pradesh, Uttarakhand and the North East. States are yet to take a call on their portion of the levy or state GST but refunds will be worked out after adjusting for input tax credit due, the sources added.
Most exemptions have been scrapped under the GST regime barring some essential goods but the government decided to grant further excise exemption for special category states to ensure a smooth transition. Industries had expected the roll out of the scheme along with GST but the plan was not ready at the time.Companies have to pay GST by August 20 after which they can file refund claims. Industries will have to seek refunds in line with detailed guidelines for the new scheme.
Tax experts sought a mechanism that provides complete tax benefit.
