Lok Sabha Question No. 3419 (UNSTARRED), answered on 2019-12-09
Subject: Tax Exemption to Industries
Ministry: FINANCE
Asked by: Sukhbir Singh Jaunapuria, Ashok Mahadeorao Nete

Government of India Ministry of Finance

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## Department of Revenue

## LOK SABHA UNSTARRED QUESTION NO. 3419

TO BE ANSWERED ON MONDAY, DECEMBER 09,2019

AGRAHAYAN 18, 1941 (SAKA)

## TAX EXEMPTION TO INDUSTRIES

## +3419. SHRI SUKHBIR SINGH JAUNAPURIA: SHRI ASHOK MAHADEORAO NETE:

Will the Minister of FINANCE be pleased to state:

- (a) the names of the States and areas wherein industries have been given exemption in
- central taxes aS on date;
- b) whether the Government has extended tax   exemption being  provided to the industries in the entire country and if SO, the details thereof the last three years and the current year; during
- c) whether the Government has decided to provide the said tax exemption in view of slowdown in industries and the said tax exemption is likely to continue in future alsc;
- (d) if s0, the details thereof with the concrete steps taken by the Government for the employees retrenched recently from the industries; along
- (e) whether the Government has also taken or proposes to take any steps for giving exemption  in central taxes including  central excise for setting up of industries in tribal, backward, remote and Naxalite affected Gadchiroli-Chimur   parliamentary
- constituency of Maharashtra for its development; and
- (f) if so, the details thereof and if not; the reasons therefor?

(a) to (f):

## ANSWER MINSTER OF STATE IN THE MINISTRY OF FINANCE (SHRI ANURAG SINGH THAKUR)

In order to promote manufacturing and industrialization in various States/areas of the country Government has   formulated  various   schemes/policies like "Budget Support Scheme" , 'North East Industrial and Investment Promotion 'North East Industrial   Development   Scheme, and   Industrial  Development The relevant details relating to these schemes/policies including the tax exemptions and incentives in   respect of these schemes/policies are as Fer Annexure-I. Policy, some States wherein industries have been given exemptions are at Annexure-II. In addition to this, various Special Economic Zones (SEZs) and Industrial have also been  provided exemptions/deductions uncer parks

Under the Income tax Act 1961 Section 8OIA and 8OIB of the income Tax Act; 1961.

Further; the: tax exemptions and other incentives allowed to SEZs are in-built in the SEZs Main   fiscal concessions and  duty benefits allowed to SEZ developers and units are as follows:

1. Exemption from Central Sales Exemption from Service Tax and Exemption  from State Sales Tax. These have now been subsumed into GST and supplies to SEZs are zero rated under IGST Act, 2017.
2. Exemptions from Income Tax for 15 years aS per Income Tax Act:
3. 3.
4. Exemption from State Sales Tax and other levies as extended by the respective
5. Duty free import/domestic procurement of goods.
6. State Government:

The tax exemptions and other incentives allowed to Export   Oriented Units (EOUs) are in-built in foreign Trade Policy 2015-20 read with handbook of Procedure 2015-20. EOUs are eligible   for reimbursement of Central Sales Tax (CST) The details of State wise SEZs and EOUs is as per Annexure-III & IV.

*****

## BUDGETARY SUPPORT SCHEME

Titleofthe\_Scheme z Scheme of Budgetary Support to the eligible units located in the States/UTs of Uttarahand, Himachal Pradesh, UT of Jammu & Kashmir, UT of Ladakh and North Eastern States including Sikkim under Goods and Service Tax Regime" dated 05.10.2017.

## BACKGROUND

With a view to give boost to industrialization in North Eastern Region and Himalayan States, DPIIT was implementing North East Industrial and Investment Promotion Policy (NEIIPP); 2007 for North Eastern Region States Various benefits provided under the policy were:-

3

- Central Capital Investment Subsidy
- Central Comprehensive Insurance Subsidy
- Central Interest Subsidy
- 100% Income tax Exemption
- Excise Duty Exemption on Value Addition basis

Special Package Scheme was being implemented for Himalayan States/UTs i.e: for Uttrakhand, Himachal Pradesh, UT of Jammu & Kashmir and UT of Ladakh (erstwhile the State of Jamru & Kashmir): Various incentives/ concession for development of industries in these states were:-

- Central Capital Investment Subsidy
- Central Comprehensive Insurance Subsidy
- Central Interest Subsidy
- 100% Income tax Exemption
- Excise Duty Exemption on Value Addition basis

the benefits / components of both these schemes except Income tax exemption and Central Excise Duty Exemption were implemented by DPIIT: The components viz. Income Tax Exemption and Central Excise Exemption were implemented by Department of Revenue; Ministry of Finance: GST Council in its meeting held on 30.09.2016 had approved the following:being being

- 1) entities payment of  indirect   Tax under any   existing Tax
2. exempted  from incentive schemie shall pay in the GST regime
3. ii) The decision to continue with any incentive given to specific industries in existing industrial policies of States or through any schemes of the Central Government shall be
4. with the concerned State or Central Government

iii) In case the State or Central Government decides to continue exemption/incentive scheme, then it shall be administered by way of reimbursement mechanism through the budgetary route, the modalities for which shall be worked out by concerned State/Centre:

only 58% shall be retained by the centre and 42% shall be devolved to the states: Therefore, the centre shall reimburse only upto 58% of the centre's share of the amount collected from these industries under GST:

GST was implemented W.ef 01.07.2017. As GST was a new exemption notification issued for VAT and Central Excise became infructuous Government was not to compensate the affected   industrial units  in NER and  Himalayan tax;

legally   obliged States/UTs due to change in tax policy and structure  There is no one-to-one correlation between central excise duty and GST.

Therefore, the GST it to the discretion of Central and State

Governments to notify Schemes of Budgetary Support to such units

Accordingly, Department of Revenue had proposed that to mitigate hardships arising due to withdrawal of excise exemption notifications, DPIIT should provide Budgetary Support to the eligible units for the residual period stipulated under the Schemes of NEIIPP /SPS by way of reimbursement of the Goods and Service Tax limited to the Central Government' s share of CGST and IGST retained after devolution to the states. Further, only such industrial units, which were  currently availing Area Based exemption under Central Excise Act, will be eligible for financial incentive under this Scheme for a definite period not exceeding ten years from the date of commencement of commercial production. duty

Therefore, keeping in view the faced by industrial units, Budgetary Support Scheme was introduced by DPIIT in consultation with Department of Revenue, M/o Finance: The Scheme was notified by DPIIT on 05.10.2017 and will likely   hardships remain in force by 30.06.2027.

The Scheme is for a residual period for which each of the units is eligible and is offered as a measure of goodwill, only to the units which were eligible for drawing benefits under the earlier Excise Exemption/refund Schemes but has otherwise 110 Duty relation to the erstwhile Schemes:

The total financial outlay of the scheme is Rs. 27,413 crores based on 58% of annual excise duty forgone due to exemption as intimated by Department of Revenue

CBIC, D/o Revenue is implementing the scheme through its field formations Tae budget allocation of DPIIT for Budgetary Support Scheme is authorized to CBIC, D /o Revenue for further disbursement to the eligible industrial units registered under the Scheme:

budget disbursement to the industrial under the Scheme of Budgetary Support since inception of the Scheme is as under:

|       |                   | RY2019-20        |                  | RY.2017-18       |
|-------|-------------------|------------------|------------------|------------------|
| SNo.  | State             | Amount disbursed | Amount disbursed | Amount disbursed |
| 1     | Uttarakhand       | 856.71           | 721.30           | 0.00             |
| 2     | Himachal Pradesh  | 204.78           | 271.80           | 71.45            |
| 3     | Jammu & Kashmir   | 173.16           | 148.90           | 0.00             |
| 4     | Assam             | 160.72           | 200.39           | 5.33             |
| 5     | Sikkim            | 222.79           | 121.00           | 58.52            |
| 6     | Meghalaya         | 72.30            | 32.98            | 34.11            |
| 7     | Arunachal Pradesh | 3.80             | 0.00             | 0.00             |
|       | Tripura           | 0.40             | 0.56             | 0.00             |
| 9     | Nagaland          | 0.80             | 2.89             | 0.00             |
| 10    | Mizoram           | 0.20             | 0.04             | 0.00             |
| 11    | Manipur           | 0.00             | 0.00             | 0.00             |
| Total | Total             | 1695.66          | 1499.86          | 169.41           |

## NORTHEASTJNDUSTRIAL ANDJNVESTMENTPROMOTIONPOLICY

- North and Investment Promotion (NEIIPP); 2007 was a revised version of the erstwhile North East Industrial Policy (NEIP), 1997, and was notified for a period 0f10 years from 1.4.2007 to 31.03.2017 with the purpose to bocst Policy
- This policy was effective upto 31.03.2017 but units that commenced commerc al production by 31.3.2017 shall continue to receive benefits beyond this date upto the committed number of years for each unit
- The Scheme covers eight North Eastern States  including Sikkim: The scherne provides incentives to all new as as existing units which go for industrial expansion located anywhere in this region and which commence commercial production within 10 years from the date of notification of NEIIPP, 2007 for a period of 10 years from the date of commercial production: Exceptions are the industries considered hazardous to public health ard environment such as tobacco and its substitutes, pan masala, plasic carry bagsrefinery products, etc well
- Following are the Central Tax Benefits available to the units in NER States under the NEIIPP, 2007 policy
- a) 100% Income Tax exemption for a of 10 years from the date of commencement of commercial production: period
- b) Excise Duty exemption on value addition basis for a period of 10 years from the of commencement of commercial production: date

## North East Industrial Development Scheme(NELDS) 2012

- To promote industrialization in NE States and to boost employment and incore generation, a new Scheme namely North East Industrial Development Scheme (NEIDS), period of five years.
- The schemie will cover manufacturing and service sector: It will give encouragement to MSME in manufacturing services  Information technology will Ie leverage to process and approve proposals and release of payment
- Following are the Central Tax Benefits available to the units in NER States under the NEIDS, 2017 :

|   1 | Income Tax(IT) Reirnbursement              | Reimbursement of Centre's share of income tax for first 5 years including the year of commencement of commercialproduction   |
|-----|--------------------------------------------|------------------------------------------------------------------------------------------------------------------------------|
|   2 | Goorls and Services Tax(GST) Reimbursement | Reimbursement up to the extent of Central Govt share of CGST and IGST for 5 Years                                            |

## [NDUSTRIAL DEVELOPMENT SCHEME2017

Industrial policy and other concessions for the erstwhile State of J&K were introduced by the DIPP (now DPIIT) o 14th June, 2002 for a period of ten years The package of incentives for the erstwhile State of J&K came to an end on 14th June, 2012. Thereafter announced which came into effect from 15.06.2012 and remained in force up to 14.06.2017. Excise exemption not exceeding 10 years was granted by Ministry of Finance vide Notification 57/2002-Central Excise dated 14.11.2002 for Neew Industrial units which have commenced their commercial   production on or after 14.06.2002 and industrial units existing before 14.06.2002,but which have undertaken substantial expansion by way of increase in installed capacity by not less than twer ty five percent on or after 14.06.2002. Duty

"To boost up industrialization in the Himalayan States, Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry have launched Industrial  Development Scheme   (IDS) for Union   Territory of Jammu Kashmir and Tnion Territory of Ladakh wef 15.06.2017 to 31.03.2020 vide notification dated 23.04.2018 and amendment dated 01.01.2019. Extension of scherne beyond 31.03.2020 will be considered after evaluation of the scheme The following Tax benefits are provided to the Industrial Units in the Union Territory of J&K and Union Territory of Ladakh:

## GSTreimbursement

All New industrial units and existing industrial units undertaking substantial expansion shall be eligible for reimbursement of Goods and Services Tax (GST) on finished products manufactured in the UT of Jammu & Kashmir and UT of Ladakh up to t1e extent of Central share of the CGST and IGST for period of 5 years from the date of commencement of commercial production subject to the following condition: paid

GST reimbursement on finished goods is applicable only on the net GST paid, other than the amount of TTax by utilization of Input Tax credit under the Input Tax Credlit paid

## Income\_Tax Reimbursement

The industrial unit set up under this scheme can claim reimbursement of Central share of income tax for first 5 years, including the year of commencement of commercial production by the unit

## States where exemptions have been given under the Income Tax Act:

| S.No.   | Name of the StatelUT   | Section   |
|---------|------------------------|-----------|
|         | Jammu & Kashmir        |           |
| 2       | North-Eastern States   | 8OIC      |
| 3       | Sikkim                 | 8OIC      |
| 5       | Uttarakhand            | 8OIC      |
|         | Himachal Pradesh       | 8OIC      |
|         | Sikkim                 | 8OIE      |
|         | Andhra Pradesh         |           |
|         | Telangana              |           |
| 9       | Bihar                  | 32(1)iia) |
| 10      | West Bengal            | 32(1iia)  |
| 11      | Andhra Pradesh         | 32(AD)    |
| 12      | Telangana              | 32AD)     |
| 13      | Bihar                  | 32(AD)    |
| 14      | West Bangal            | 32(AD)    |

## StatesfUnion Territories-wisc distribution of SEZS established in the Country

| States[UTs     | Central Government SEZs set up the enactment of SEZs 2005 prior Act,   | State Govermentl: Private Sector SEZs set up to the enactment of SEZs Act; 2005 prior   | Formal Approvals granted under the SEZs Act; 2005   | Notified SEZs under the SEZ Act 2005   | Total Operationa/ SEZs (Including to SEZs Act + under the SEZs Act) prior   |
|----------------|------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|-----------------------------------------------------|----------------------------------------|-----------------------------------------------------------------------------|
| Andhra Pradesh |                                                                        |                                                                                         | 32                                                  | 27                                     | 20                                                                          |
| Chandigarh     |                                                                        |                                                                                         | 2                                                   | 2                                      | 2                                                                           |
| Chhattisgarh   |                                                                        | 0                                                                                       | 2                                                   |                                        |                                                                             |
| Delhi          | 0                                                                      | 0                                                                                       | 2                                                   | 0                                      |                                                                             |
| Goa            |                                                                        | 0                                                                                       |                                                     | 3                                      |                                                                             |
| Gujarat        |                                                                        | 2                                                                                       | 28                                                  | 24                                     | 20                                                                          |
| Haryana        |                                                                        | 0                                                                                       | 23                                                  | 20                                     |                                                                             |
| Jharkhand      | 0                                                                      | 0                                                                                       | 2                                                   | 2                                      | 0                                                                           |
| Karnataka      | 0                                                                      | 0                                                                                       | 62                                                  | 51                                     | 32                                                                          |
| Kerala         | 1                                                                      |                                                                                         | 29                                                  | 25                                     | 19                                                                          |
| Madhya Pradesh | 0                                                                      |                                                                                         | 12                                                  | 6                                      | 5                                                                           |
| Maharashtra    |                                                                        |                                                                                         | 48                                                  | 42                                     | 31                                                                          |
| Manipur        |                                                                        | 0                                                                                       |                                                     |                                        | 0                                                                           |
| Nagaland       | 0                                                                      | 0                                                                                       | 2                                                   | 2                                      |                                                                             |
| Odisha         | 0                                                                      |                                                                                         |                                                     | 5                                      | 5                                                                           |
| Puducherry     | 0                                                                      | 0                                                                                       | 1                                                   | 0                                      | 0                                                                           |
| Punjab         | 0                                                                      |                                                                                         | 5                                                   | 3                                      | 3                                                                           |
| Rajasthan      |                                                                        | 2                                                                                       | 5                                                   | 4                                      | 3                                                                           |
| Tamil Nadu     |                                                                        |                                                                                         |                                                     | 50                                     | 40                                                                          |
| Telangana      |                                                                        |                                                                                         | 63                                                  | 56                                     | 30                                                                          |
| Uttar Pradesh  |                                                                        | 1                                                                                       | 23                                                  | 20                                     | 13                                                                          |
| West Bengal    |                                                                        | 2                                                                                       | 7                                                   | 5                                      |                                                                             |
| GRAND TOTAL    |                                                                        | 12                                                                                      | 417                                                 | 349                                    | 238                                                                         |

## Updated State-wise distribution of EQUs

| SEZ   | State/UTs             |   Functional EOUs |
|-------|-----------------------|-------------------|
| NSEZ  | Chandigarh            |                02 |
| NSEZ  | Delhi                 |                08 |
| NSEZ  | Haryana               |                52 |
| NSEZ  | Himachal Pradesh      |                04 |
| NSEZ  | Jammu & Kashmir       |                01 |
| NSEZ  |                       |                08 |
| NSEZ  | Rajasthan             |                53 |
| NSEZ  | Uttar Pradesh         |                55 |
| CSEZ  | Karnataka             |               380 |
| CSEZ  | Kerala                |                87 |
| ISEZ  | Madhya Pradesh        |                 8 |
| VSEZ  | Andhra Pradesh        |                78 |
| VSEZ  | Telangana             |               119 |
| FSEZ  | West Bengal           |                31 |
| FSEZ  | Jharkhand             |                02 |
| FSEZ  | Orissa                |                01 |
| MEPZ  | Tamil Nadu            |               331 |
| MEPZ  | Pondicherry           |                21 |
| KASEZ | Gujarat               |               185 |
| SEEPZ | Maharashira           |               224 |
| SEEPZ | Dadar & Nagar ilaveli |                15 |
|       |                       |                35 |
| TOTAL |                       |              1700 |