In a major relief to industries in Uttarakhand and Himachal Pradesh, the Centre has ruled that manufacturing units given a 10-year excise exemption under hill-state incentives would be entitled to expand and introduce new products.
The clarification comes in a note from Ravindra J Dange, joint secretary, Central Board of Excise & Customs. Trade and industry chambers had sought a clarification on the expiry of excise exemption provided to industries set up between 2003 and March 31, 2010.
Basically, this means the expansion projects or new production lines of eligible industrial units would also enjoy excise exemption. However, analysts pointed out that the benefit would accrue only up to 10 years from the initial date of commercial production. In other words, the excise exemption would be available for the remaining period even for new products.
Tata Motors, Hero Honda, Ashok Leyland and Nestle are among the roughly 5,000 companies that have set up new units in the two hill states. In Uttarakhand alone, 2,446 units were set up during the eligibility period at an investment of over Rs 26,000 crore. Most of these companies still have six to 10 years left before their exemptions expire. Tata Motors has added Nano car production at its Pantnagar plant, where it earlier produced only commercial vehicles.
“The provisions of these notifications (issued in 2003) do not place a bar or restriction on any addition/modification in the plant or machinery or on the production of new products by an eligible unit after the cut-off date (March 31, 2010) during the exemption period of 10 years as per the notification,” stated Dange’s note.
| BRACING INDUSTRIAL CLIMATE |
| * Expansion or new lines of eligible industrial units to receive excise exemption |
| * But excise benefit to accrue only up to 10 years from initial date of production |
| * Tata added Nano production at Pantnagar, where it made commercial vehicles |
| * Pharma firms were worried about increasing capacity or changing formulations |
| * UPA govt hasn’t extended area-based sops further, as it plans to introduce GST |
Pharma companies that had set up new units were growing increasingly concerned about the issue of increasing capacity or changing formulations for future demand. Companies like Ranbaxy, Elder Pharma, IPCA Laboratories and others had already started production in their new units. The anxiety among these firms grew following an earlier CBEC clarification that companies could not introduce new formulations on the same machine.
“We welcome the new move, which will give tremendous boost to industries in both Uttarakhand and Himachal Pradesh,” said Pankaj Gupta, president of the Industries Association of Uttarakhand, which had made several representations on the issue.
"This is particularly good news for FMCG and pharma sectors, where most of the bigger players already have a presence in these states. Many of them could consider making more investments by enhancing their existing capacity. Companies may also look for idle capacities of third party manufacturers in these states. Overall industrial activity is likely to pick up," said Pratik Jain, executive director at KPMG India.
The NDA government had waived excise duty on projects in these two states in 2003. The exemption was later extended in 2007 up to March 31, 2010. The UPA government did not extend area-based exemptions further, as it plans to introduce a goods & services tax.
