The finance ministry has relaxed the area-based excise duty exemption
norms, entitling companies to seek higher refunds based on their value
addition. Manufacturing units with 15 per cent value addition are now
eligible to seek special rate of refunds. Prior to the amendment, the
limit was set at 25 per cent.
The amendments are applicable to units located in Jammu and Kashmir,
North-East and Kutch district of Gujarat with effect from April 1,
2008. The move aims at preventing misutilisation of the incentives by
some units, which had been using the route only to claim input
credit.
Under the revised provisions, for items like iron and steel, cement,
starch and coco-butter, a uniform rate of 75 per cent of the total
duty payable has been specified for computing the refund amount.
However, companies are entitled to fix special rates higher than the
75 per cent uniform rate.
According to the new rules, a unit is entitled to apply for special
rate if the actual value addition exceeds 15 per cent. Previously,
units with more than 25 per cent value addition were eligible for such
benefits.
"This is a substantive relaxation. Units that have less manufacturing
infrastructure base, will now be entitled for this benefit," said
Vivek Mishra, partner, Ernst & Young.
Manufacturers have also been allowed to file application for fixation
of special rate by September 30 of a financial year. Prior to the
amendment, the time limit was 60 days from the beginning of a
financial year. This amendment will enable units to make a claim on
the basis of the finalised accounts for the previous financial year.
New units commencing production on or after April 1, 2008, have also
been permitted to make an application for special rate.
The current provision of restricting refund payments only to the total
duty paid by the manufacturer during a month has been revised to
annual duty payments.
Manufacturers have made representations to the finance ministry
holding that bulk purchasers of raw materials have been at a
disadvantage on account of the current provision.
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