No tax holiday for output boost of non-exempt items

Companies enjoying excise duty exemption in the tax free zones of Himachal Pradesh , Uttrakhand, and the North-East cannot avail the tax holiday in respect of any production capacity increases for goods such as tobacco and gutkha, explosives, paper, and fibre glass. 
The finance ministry has in a circular to its field officials clarified that the tax holiday will not be available for manufacture of goods that have been kept out of the exempted list. Area- based excise duty exemption is available to the units in the specified areas in the North-East region, Jammu & Kashmir, Himachal Pradesh and Uttarakhand. The exemption is applicable to the new industrial units set up after the specified date and also to the existing units which have expanded capacity by at least 25%. 
The clarification comes after the Central Board of Excise and Customs , the apex indirect tax body, received several references on the issue of tax holiday from its field officials about eligibility of the units manufacturing specified goods as well as non-specified goods. 
They had sought to know if overall capacity addition would be eligible for the tax exemption or only enhanced production of specified goods. 
It is clarified that only when the substantial expansion of the installed capacity of the specified goods is undertaken, then only the benefit of notification would be applicable , the CBEC circular said. For example, if a unit is making tobacco product (say gutkha, a non-specified good, which is not allowed the benefit of exemption) and also iron and steel articles ( specified goods, which are lowed benefit of exemption), the tax benefit will be available only when it increases installed capacity of iron and steel articles by 25%. On the contrary, even if it increases production of gutkha by 100%, it will not get the benefit. 
The CBEC has earlier also issued several such clarifications to tighten the area-based exemption provision to prevent its misuse. 

AREA OF CONCERN 

Cos cant avail of excise benefits for production capacity increases for goods such as tobacco & gutkha , explosives, paper & fibre glass 

Area-based excise duty exemption is available to the units in specified areas in North-East region, J&K , Himachal & Uttarakhand 

CBEC has clarified only when the substantial expansion of the installed capacity of the specified goods is undertaken , then the excise benefit would be applicable 

Economic Times, New Delhi, 26-01-2010.

 
     
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