Is the Sikkim Celebration over? Excise exemption expires?

By Vijay Kumar

Prashant from Mumbai asked us in a mail yesterday,

request you to update us if any amendment issued by Central Govt. for the extension of exemption for unit located at state of Sikkim.

Notification No. 71/2003-Central Excise, DATED September 9, 2003 stipulates that

The exemption contained in this notification shall apply only to the following kinds of units namely:-

(i) new industrial units which have commenced commercial production on or after the 23rd day of December, 2002, but not later than the 31st day of March, 2007;

(ii) Industrial units existing before the 23rd day of December, 2002, but which have undertaken substantial expansion by way of increase in installed capacity by not less than twenty-five per cent. on or after the 23rd day of December, 2002, but have commenced commercial production from such expanded capacity, not later than the 31st day of March, 2007.

Similar is the stipulation for Notification No. 56/2003-Central Excise, DATED June 25, 2003

Now 31^st March 2007 is history. But what happens to these notifications? TIOL tried to find out from the Government and as usual, nobody had a clue. But then is the Sikkim exemption over? Doesn’t seem so!. Maybe they will do a retrospective correction.

Incidentally on 29^th March 2007, the cabinet had approved the North East Industrial and Investment Promotion Policy (NEIIPP), 2007, the main features of which are

(i) Sikkim will be included under NEIIPP, 2007 and the ‘New Industrial Policy and other concessions for the State of Sikkim’ announced earlier in December, 2002 will be discontinued from the date of notification of NEIIPP, 2007.

(ii) Under NEIIPP, 2007, all new units as well as existing units which go in for substantial expansion, unless otherwise specified and which commence commercial production within the 10 year period from the date of notification of NEIIPP, 2007 will be eligible for incentives for a period of 10 years from the date of commencement of production.

(iii) The incentives under the NEIIPP, 2007 will be available to all industrial units, new as well as existing units on their substantial expansion, located anywhere in the North Eastern Region. Consequently, the distinction between ‘thrust’ and ‘non thrust’ industries made in NEIP, 97 will be discontinued from the date of notification of NEIIPP, 2007.

(iv) Under NEIIPP, 2007 incentives on substantial expansion will be given to units effecting ‘an increase by not less than 25% in the value of fixed capital investment in plant and machinery for the purpose of expansion of capacity/modernization and diversification’ as against an increase by 33 ½ % prescribed at present.

(v) Under NEIIPP, 2007, 100% excise duty exemption will be continued as at present on finished products made in the North Eastern Region. However, in cases, where the CENVAT paid on the raw materials and intermediate products going into the production of finished products (other than the products which are otherwise exempt or subject to nil rate of duty) is higher than the excise duties payable on the finished products, ways and means to refund such overflow of CENVAT credit will be separately notified by the M/O Finance.

(vi) 100% income tax exemption will continue under NEIIPP, 2007 as at present.

(vii) Capital investment subsidy will be enhanced from 15% of the investment in plant and machinery to 30% and the limit for automatic approval of subsidy at this rate will be Rs. 1.5 crore per unit as against Rs. 30 lakhs at present. Such subsidy will be applicable to units in the private sector, joint sector, cooperative sector as well as the units set up by the State Governments of the North Eastern Region. For grant of capital investment subsidy higher than Rs. 1.5 crore but upto a maximum of Rs.30crore, there will be an Empowered Committee.

(viii) Interest subsidy will be made available @ 3% on working capital loan under NEIIPP, 2007 as at present.

(ix) Under NEIIPP, 2007, new industrial units as well as the existing units on their substantial expansion will be eligible for reimbursement of 100% insurance premium under the Comprehensive Insurance Scheme.

This must have been the reason for the government not amending the notifications extending the dates. But when is it going to come and as of now should prospective investors cancel their tickets to Sikkim?