Chandigarh: Despite being under pressure to make amends in its package of sops to industry in hilly states from other states, Central government departments, including chemical and fertilisers ministry headed by Ram Vilas Paswan and the Economic Advisory Committee headed by C. Rangaranjan (which has also recommended that excise exemption to units involved in contract manufacturing be withdrawn), had postponed any decision on the issue till the Uttarakhand (February 2007) and Himachal Pradesh (December 2007) elections were through.
Soon after the Himachal elections, the Department of Central Excise issued a notification that the excise exemption does not apply to non-manufacturing units in these states.
“The units into packaging were earlier allowed excise exemption as any value addition, by the excise department’s own definition, was a part of manufacturing. Now, after this notification, such units, which are not more than 3 to 4 per cent in Himachal, will not be able to claim exemption. But it would not impact the majority of industries here,” says Rajendra Guleria, chairman of Himachal CII, who sees it as a move to “please other states”.
But neighbouring Punjab, especially its pharma industry, sees it as the beginning of an end to “discrimination” that has almost ruined them. “There was a flight of industry to tax-exempt states after January 2005, when maximum retail price (MRP)-based excise exemption was introduced. This anomaly has led to these states producing medicines, which, according to a report prepared by NIPER, are almost 326 per cent steeply priced than those produced in non-tax exempt states. They are also sub-standard and spurious. Why is a policy being allowed to play havoc with the lives of crores of poor patients at the behest of the powerful pharma lobby,” says Jagdeep Singh, president of Punjab Pharma Industry Association.
“Besides, the country is moving towards goods and services tax (GST) regime, which will most likely be put in place in the 2010 budget. All these excise exemptions will lose their relevance then,” he adds.
However, industry sources in both Himachal and Punjab say the number of industries into peripheral activities in Himachal such as preservation during storage, cleaning operations, packing, re-packing, labelling or re-labelling, sorting, alteration of retail sale price, etc, is pretty high. “It is not easy to shift manufacturing base for a limited period tax holiday. So most units avail of the tax exemption through peripherals,” said an industrialist, who owns a factory in the industrial town of Baddi in Himachal.
Source: ENS