GST refund: Govt to make provisions for reimbursement in excise-free zones

Business Standard By July 7, 2017, 02:17 IST

Reimbursement to be limited to 58% of the Centre's share of GST

The Union government has moved a proposal to make a budgetary provision for refunding its share of area-based exemptions on indirect taxes given to certain states in the past.

In last week’s meeting of thee goods and services tax (GST) Council, it was decided that ‘all entities exempted under payment of indirect tax under any existing incentives scheme of central or state governments shall not continue under the GST regime and existing units shall pay tax under the GST regime’.

Under the discretionary powers left to it by the Council regarding these incentives, the finance ministry has proposed to provide budgetary support for refunding its share in GST to such units to which exemptions in indirect taxes were granted, for promoting industrialisation.

The units are situated in Jammu & Kashmir, Himachal Pradesh, Uttrakhand and the northeastern states, In these states, some areas have been catagorised as excise-free zones and units in those areas were eligible for expemptions. According to a finance ministry official, a budgetary provision will be made to refund the central government’s share in those incentives for the residual period of the unit. The refund will apparently be to the extent of 58 per cent of the Centre’s share of GST.

Since different units were set up at different intervals and their residual or balance period from the time they were set up could be different, the ministry proposes to calculate budgetary support on a monthly basis, said the source. Certain limitation conditions regarding the benefits assured prior to GST implementation are proposed to be continued.

According to the proposal, refund will be calculated after deducting input credit, if applicable for a unit. To ensure a refund is granted well in time, a proposal has been made that a refund application will have to be filed electronically by the seventh of the month succeeding the month in which GST has been paid; the refund will be granted in a month. This budgetary support will be paid from budgetary allocations made to the department of industrial policy and promotion under the ministry of commerce.

Bullion refineries may pass on benefit to overseas mines

Gold dore refiners have said if the Centre refunds its share to units in excise-free zones, then several bullion refiners may pass on the benefit to foreign buyers in the form of higher premium payment for procuring dore or unrefined gold. But domestic tariff areas (DTAs) refineries won’t enjoy such benefits and could be deprived of dore, which isn’t freely available.

According to a proposal being mulled by the finance ministry, the Centre’s share of GST for bullion refineries comes to 0.87 per cent. This is because gold has 3 per cent GST and the Centre will refund 58 per cent of the half of 3 per cent; this percentage will be an additional margin for refineries in such zones. James Jose, secretary, Association of Gold Refineries and Mints, a body representing refineries in DTAs, said, “Bullion refineries when they import dore or unrefined gold, pay 9.35 per cent import duty compared to 10 per cent for refined gold import by other agencies. From 0.65 per cent after cutting expenses they have to make a profit. However, with excise-free zones, refineries get an extra benefit when government refunds the GST they have paid.”

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