The excise duty exemptions given to industrial units will be converted into a subsidy scheme in the proposed Goods and Services Tax (GST) regime.
All the industries that enjoy area-based exemptions will have to pay taxes in the new indirect tax regime. They will, however, be entitled to receive cash refund from the government for the unexpired period of their tax holiday.
The existing area-based exemptions would not continue in the present form in GST, said finance ministry officials at a seminar by industry chamber PHDCCI today. “How to retain exemptions in a manufacturing activity is a challenge. The idea is to retain them till their sunset period is over. So, a subsidy will be provided to the companies so that the chain is not broken,” an official said.
The Empowered Committee of State Finance Ministers had also suggested that after the introduction of GST, tax exemptions related to industrial incentives should be converted into cash refund schemes after collection of tax, so that the GST scheme on the basis of a continuous chain of set-offs was not disturbed.
The officials also clarified that natural gas would be kept outside the purview of GST, but naptha would come under it. Besides, the Central Sales Tax would continue for non-GST items like petroleum.
For taxation of services in GST, the government will develop numerical codes. It has already started preparing the codes.
