Area-based exemption scheme refunds: Jammu and Kashmir HC issues notices to governments

By: | Published: July 28, 2018 4:39 AM

The Jammu and Kashmir High Court has issued notices to the Centre and the state government on a petition filed by state-based industries on GST refunds due to them in lieu of the now-redundant area-based exemption granted to these businesses in the pre-GST regime.

Jammu and Kashmir High Court , HCJammu and Kashmir High Court (PTI)

The Jammu and Kashmir High Court has issued notices to the Centre and the state government on a petition filed by state-based industries on GST refunds due to them in lieu of the now-redundant area-based exemption granted to these businesses in the pre-GST regime.

In a bid to promote industrialisation of north-eastern and hilly states, the government in 2007 offered excise duty exemption for businesses located there. However, with the rollout of the GST in July last year, the Centre said it would only reimburse its share of central GST and integrated GST (IGST) as the central government devolves 42% of tax collected to the states.

Many of these businesses complained that they are facing considerable financial hardship as erstwhile excise exemptions have been short-changed for central and state budgetary support schemes with only 29% of IGST refund for inter-state supplies, Abhishek A Rastogi, a partner at Khaitan & Co, said.

Rastogi said industrial units in the J&K are struggling with the quantum of refunds, which could jeopardise huge investments made by these businesses based on alluring industrial policies of the state dating back to 2002.

Last year, the Union Cabinet had cleared budgetary support of Rs 27,413 crore for the erstwhile area-based exemption scheme for 10 years starting July 2017. The government said it estimated that a total of 4,284 eligible units located in J&K, Uttarakhand, Himachal Pradesh and north-eastern states, including Sikkim, would benefit from the scheme.
However, one of the parties to the petition said the new budgetary support schemes do not factor in the practical difficulties faced by such units as they have to wait for disbursal of refunds without any defined time-frame under the GST law.

“The unintended omission of continuing tax benefits has virtually rendered doing business in these areas economically unviable. Aggrieved by the arbitrariness in the law, units approached the J&K High Court. Thankfully, the HC understood the gravity of the issue faced by these units,” Rastogi said.

Another petitioner said while the state government provided for 100% tax refund out of its kitty of the state GST, there is significant reduction in the Centre’s share of refunds.

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