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Excise duty exemption in HP, U`khand to end Thursday

Last Updated: Wednesday, March 31, 2010 - 23:03

New Delhi: Industries planning fresh
investments in Uttarakhand and Himachal Pradesh lured by the
exemption from excise in the two states may have to rethink
their strategy as the tax benefits will come to an end

The Centre had waived off excise duty on investments in
these two states through a notification in 2003 till March 31,
2007. The exemption was later extended till March 31, 2010.

"As of now, there is no extension to these exemption
notifications," spokesman of Central Board of Excise and
Customs said here.

Investments in these two states were exempted from excise
duty as a special case to push growth in the economically
backward regions.

Lured by the prospect of increased margins due to
exemption from excise, many enterprises, including FMCG firms
like Dabur, Emami, Hindustan Unilever, Nestle and auto makers
like Hero Honda, Tata Motors have made big investments in the
two states.

When contacted, Hero Honda, which has a plant in
Haridwar, refused to comment on the matter.

A spokesperson of Tata Motors, which has a plant in Pant
Nagar, said, "It will not make any difference on our company
as we have already made investment and started work on our

Even after the exemption is waived off, all investments
made till today will continue to enjoy the benefits for 10
years, sources said.

The exemptions were criticised for many reasons and were
blamed for flight of capital from neighbouring states
and skewed development in the state.

To minimise the damage, the government in fact changed
the rules for availing these modifications later. As such,
companies that carried out only peripheral activities like
labelling, packaging or sorting, instead of manufacturing were
taken out of the tax holiday.

Various area-based exemptions are estimated to have led
to excise duty loss of around Rs 6,000 crore this fiscal year
to the government.

Emami Group Director Aditya Agarwal said, "It will not
have any impact on our business. Our units are already
operation there. Its only for those new projects which will be
impacted. As for us, we don’t plan any fresh investments there
as of now."

Helped by the tax exemption, Baddi in Himachal Pradesh
had emerged as the largest pharmaceutical manufacturing hub in

However, reduction of excise duty across the country on
Pharma products from 16 to 8 per cent in 2008, created a more
level playing field and reduced the region`s sheen for

"We are not aware of any significant investments, being
made in these locations in the past one or two years and the
end of exemptions in these two states will have no impact on
the pharmaceutical segment," Indian Drug Manufacturers
Association Executive Director G Wakankar said.


First Published: Wednesday, March 31, 2010 - 23:03
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