Incentives
1.General
Facilities Available To All Manufactures.
* Under the HP GST ACT.
*
Under
the Central Sales Tax Act.
2.Specific Incentives Available to Industrial Units.
*
Incentives
of Exemption/Concession From Payment of Tax on Purchase of Raw, Processing
& Packing Material Under the HPGST ACT...
*
INCENTIVES
OF SALES TAX RELATING TO SALE OF MANUFACTURED GOODS UNDER THE HP GST ACT.
*
MAIN
CONDITION OF ELIGIBILITY
*
SECURITY
*
OTHER
PROVISIONS
*
INCENTIVE
OF COMPLETE TAX EXEMPTION OF CONFESSIONAL RATE OF TAX
*
INCENTIVE
OF TAX DEPARTMENT
*
EXEMPTION/CONCESSIONS
OF SALES TAX UNDER THE CENTRAL SALES TAX ACT.
There
are three facilities, which any manufacturer/intending manufacturer can avail:-
i)Any
intending manufacturer who wants to set-up his industry in the state of HP for
the purpose of manufacturing goods for sale , can obtain provisional
registration certificate under the HP GST Act that enables him to purchase
raw-material, packing materials and processing materials etc. at concessional
rate of tax from within the state which are specified in his registration
certificate. By virtue of the provisional registration certificate, he also
becomes eligible to be registered under the CST Act.
ii)A
manufacturer is entitled to a set –off of the amount of tax already paid by him
to the selling registered dealer on the purchase of raw-materials from the
amount of sales tax due from him on the sale of final product manufactured by
him. The set off is available whether such purchases have suffered tax at the
full rate or concessional rate (applicable to industrial units).
iii)A
manufacturer is also entitled to deduct the purchase value of goods which have
suffered tax at full rate at the first stage and have been used in the
manufacture of goods(except tax free goods) for sale including inter-state and
export sales, from his gross turn-over for the purpose of computing taxable
turn-over.
UNDER THE CENTRAL
SALES TAX ACT, a manufacturer who is registered under the Act, can purchase
machinery, raw-materials, processing and packing materials which are specified
in his registration certificate at concessional rate of CST by issuing `C’
forms.
All
the industrial units located in the state and manufacturing goods for sale have
been allowed incentive of exemption/concessional rate of tax on the purchase of
raw, processing or packing material upto the period ending 31.3.2009 w.e.f.
27.7.1999. However, this incentive is not available on the purchase of timber (
including converted timber), lime stone and shale by an industrial unit.
(i)
INCENTIVE OF EXEMPTION FROM PAYMENT OF TAX.
The
industrial units which come into commercial production on or after 1.4.99 and
are located in the tax free zone i.e the tribal areas of the State are entitled
for total exemption on the purchase of goods to be used as raw, processing or
packing materials by it.
ii)
INCENTIVE OF CONCESSIONAL RATE OF TAX.
All
industrial units except those described at (i) above, are entitled for a
concessional rate of 1% on the purchase of goods for use by them as raw,
processing or packing materials.
MAIN
CONDITIONS OF ELIGIBILITY.
i)The
goods purchased should be specified in the certificate of registration of the
purchasing entrepreneur for use by him as raw, processing or packing material
for goods, manufactured by him for the purpose of sale including
inter-state-sale or branch transfer or consignment transfer for sale.
ii)The
industrial unit should be registered under the HPGST Act and it should fulfill
all eligibility conditions.
iii)The
purchase of raw, packing or processing material is to be made from a registered
dealer who should satisfy himself before effecting the sales that the goods
being sold by him are specified in the certificate of registration of the
purchasing entrepreneur.
iv)The
purchasing entrepreneur has to issue a certificate in form ST XXV B to the
selling dealer who is required to furnish the same alongwith the sales tax
return for claiming exemption/concession from payment of tax.
v)In
the case of a unit coming into production on or after 1-4-99 & located in
industrially developing area, the entrepreneur must employ atleast 65 percent
and its total man power from amongst the bonafide Himachalies. This percentage
is 80% for an unit located in industrially backward area.
vi)
The industrial unit must be registered/acknowledged by the department of
industries, HP.
vii)
The entrepreneur should obtain a certificate in Form RM-I from the appropriate
Assessing Authority, after he has obtained a certificate in Form RM-II from the
GM, DIC of the department of industries or the Director of Industries, HP.
Application for obtaining the certificate in Form RM-I is required to be
accompanied by a deposit receipt of Rs. 25/- into Govt. treasury.
viii)The
selling dealer as well as the purchasing entrepreneur both should comply with
the provisions of the HPGST Act and the rules framed thereunder.
The
incentives relating to sale of manufactured goods by the industrial units
available under the HPGST Act are of two kinds:-
§
Exemption/concession
from payment of sales tax.
§
Incentive
of deferred payment of sales tax.
The
latest policy of sales tax incentives to the industries is primarily meant for
the industries which have come into commercial production on or after 1.4.1999.
But these incentives could also be availed by certain industries which were in
existence before 1.4.1999 and were availing some kind of sales tax incentives
under the notifications issued by the Government from time to time, for the
un-expired period of these incentives, had they exercised an option by 30th
Sept. 1999. The provisions which have been discussed here-in-after apply only
to the industries which have come into production on or after 1.4.1999.
The
breweries, distilleries, non-fruit/ vegetable based wineries and bottling
plants (both of country liquor and Indian Made Foreign Liquor )are not entitled
for availing either of these incentives.
Whole
of the state has been divided into three zones in order to provide better sales
tax incentives in those areas which lack industries development so far or are
industrially backward. These areas are as follows:-
§
Tax
free industrial zone comprising of the tribal
areas of the State.
§
Industrially
developing area comprising of the Paonta
Sahib, Nahan, Nalagarh, Dharampur and Solan development blocks (excluding
backward Panchyats.)
§
Industrially
backward area including all the areas of the
state other than described at (i) and (ii) above.
Certain
industries have also been identified as priority industries, which have been
given better sales tax incentives in comparison to other industries falling in
non-priority sector. The priority industries are listed below:-
§
Agriculture-horticulture
produce (including hops) based units, food products and mineral water bottling
units.
§
Cold
storage units.
§
Fruit/vegetable
based winery units.
§
Herb-based
units and aromatic units.
§
Wool
( including angora wool) based units.
§
Units
engaged in seri-culture related industrial activities.
§
Electronic
units including information technology units, computer software and electronic
assembly units where value addition in assembling is 14% or more.
§
100%
export-oriented units.
§
Units
set-up by non-resident Indian.
For
availing the exemption/concession/deferment of sales tax, an unit must fulfill
the following conditions;-
§
It
should be registered as a dealer under the HPGST Act for the purpose of
manufacture of goods for sale.
§
It
should comply with the provisions of the HPGST Act and the CST Act and the
rules made or notifications issued thereunder.
§
The
unit should be registered/acknowledged ( as applicable) by the department of
industries HP and it must obtain a certificate in Form I from the General
Manager, DIC/director of industries HP or his nominee.
§
It
should employ atleast 65 percent of manpower from amongst the bonafide
Himachalies if it is located in the industrially developing areas. This
percentage is 80 percent for an unit located in industrially backward area.
A. INCENTIVE OF COMPLETE TAX
EXEMPTION OR CONCESSIONAL RATE OF TAX
These
incentives are available to specific industries for a definite period, which
should be reckoned from the date of commencement of commercial production by
the units or 27th July 99, whichever is later.
INCENTIVE
OF COMPLETE TAX EXEMPTION.
For
the purpose of complete tax exemption only the following three type of
industries are eligible:-
§
Industrial
units located in the tax free industrial zones.
§
Certain
village industrial units.
§
Fruit
, vegetable and maize based industrial units .
All
these industries are required to obtain a certificate in form E from the
Assessing Authority on the basis of certificate in form I which has to be
obtained from the department of industries before these become eligible to
avail the incentives.
The
period for which the incentives are available along with the type of industries
or any specific conditions laid down for the purpose of availing the incentive
are given below subject to fulfillment the general conditions explained above:-
INCENTIVES
TO INDUSTRIAL UNITS LOCATED IN THE TAX FREE INDUSTRIAL ZONE.
An
industrial unit set up in the tax free industrial zone i.e. the tribal area of
the State which comes into commercial production on or after 1.4.1999 is
entitled for complete tax holiday for a period of ten years.
b) INCENTIVE TO VILLAGE INDUSTRIAL UNITS..
A
village industrial unit located in a rural area of the state, which has a fixed
capital investment up to Rs 10 lakhs only and is wholly financed by the KVI
Commission of the Central Government or the Himachal Pradesh KVI Board and
which commences commercial production on or after 1.4.1999, is entitled for
complete sales tax holidays for the following periods:-
§
For
a period of eight years if the unit is located in industrially backward area or
falls in the category of priority industrial unit, although located in
industrially developing area.
§
For
a period of five years if the unit is a non-priority industrially unit and is
located in industrially developing area.
c)
INCENTIVE TO FRUIT, VEGETABLE AND MAIZE
BASED INDUSTRIAL UNITS.
The
industrial units which based on fruit, vegetable or maize as raw material and consumes
atleast 60% of the local produce and which is located in industrially backward
area of the State, is entitled for complete tax exemption for a period of 10
years.
2)
INCENTIVE OF CONCESSIONAL RATE OF TAX.
A
village industrial unit other than that specified at (i)( b) above) or a tiny
industrial unit is entitled for a concessional rate of sales tax to be paid by
it @25% on the rate normally applicable on the sale of goods manufactured by
it, for a period of eight years if the unit is located in the industrially
backward area and for a period of five years if the unit is located in the
industrially developing area. The Village Industrial unit has to be set-up in a
rural area with the financial assistance of the KVIC or the HP KVIB for
availing the incentive. These units have also to procure a certificate in form
`E’ from the Assessing Authority as in the case of units, which are entitled
for complete tax holiday.
The
Industrial units located in the industrially developing areas or the
industrially backward areas have been given the incentive of sales tax
deferment for the following periods:-
§
For
a period of eight years if the industrial unit is located in industrially
backward area.
§
For
a period of eight years if the industrial unit happens to be a priority
industrial unit even if it is located in industrially developing area.
§
For
a period of five years if the industrial unit is a non-priority industry and is
located in industrially developing area.
The
period of deferment has to be reckoned from the date commencement of commercial
production or 18.8.1999 which ever is later.
The
units located in tax free industrial zones, breweries, distilleries,
non-fruit/vegetable based wineries, bottling plants (both of country liquor and
Indian made foreign liquor) are excluded from availing incentive of tax
deferment.
Besides
fulfilling the general conditions of eligibility, an unit is required to obtain
a tax deferment certificate in Form-ST-(DP)-II from the Assessing Authority
which should be got renewed every three years.
QUANTUM
OF ENTITLEMENT.
The
incentive can be availed for the entire amount of sales tax due and payable as
per the returns filed by the eligible industrial unit on the sale of goods
manufactured for the entire period of entitlement.
PROCEDURE
FOR OBTAINING TAX DEFERMENT CERTIFICATE.
The
unit after obtaining certificate in form I from the department of industries is
required to apply to the Assessing Authority in form ST- (DP)- I within a period of thirty
days from the date of issue of certificate in form I.
The
application should be in order and it should be accompanied with the
certificate in form I and the security in respect of the amount of tax to be
deferred. The Assessing Authority if, finds the application in order, issues
the certificate in form-ST-(DP)-II which is valid from the date of issue. An
unit is eligible for tax deferment only after it has obtained the tax deferment
certificate.
An
unit applying for tax deferment certificate is required to secure the amount of
tax to be deferred by furnishing security/surety in the following manner in
order of preference :-
§
The
unit should execute a mortgage deed in form ST-(DP)-IV in favour of the Govt. thereby
creating first charge on the assets and property of the unit or any other
property owned in HP by the applicant . The amount of security to be furnished
should be equal to the "Notional Sales Tax Liability" which is the
amount of tax calculated on the estimated sales of furnished goods during a
year computed at the installed capacity of the eligible unit.
§
If
the security furnished in the above manner falls short of the notional tax
liability, the applicant is required to secure the balance amount either
through cash deposit in the Government treasury or through a post office saving
banks pass book pledged to the Assessing Authority.
§
If
the securities furnished as above are inadequate to secure the whole of the
amount of ‘notional sales tax’ liability , the applicant unit should furnish
security for remaining amount in form-ST(DP) V from two solvent dealers registered
with the Excise and Taxation Department. After the amount of ‘notional sales
tax’ liability in the first year of tax deferment has been secured in the above
manner, the unit should furnish securities in the like manner for which tax
deferment is to be availed by it for the subsequent periods of return.
RE-PAYMENT
OF THE DEFERRED TAX.
The
re-payment of the deferred tax will start from the sixth year which is reckoned
from the date specified in the deferment certificate in form ST (DP) II. The
re-payment of tax deferred is required to be completed in equal number of years
for which the incentive of making deferred payment of sales tax is availed. If
the tax deferment is availed for five years, the repayment shall commence from
6th year and the amount of tax deferred for the fifth year shall be
payable in 10th year and if it has been availed for eight years,
then the re-payment will continue upto the 13th year.
*
If the unit is found to have suppressed the sales of goods manufactured or
indulges in evasion of tax, it shall lose its entitlement for deferment of tax.
*
The Assessing Authority is empowered to cancel the certificate of deferment of
tax if it has been obtained by the unit by fraud, deceit mis-representation,
mis-statement or concealment of materials facts.
*
If the unit fails to pay the deferred amount of sales tax on the due date of
payment, the tax deferment certificate shall become liable to be cancelled by
the Assessing Authority and a unit will be liable to pay the entire amount for
which tax deferment has been availed by it.
*
The Assessing Authority can also cancel the certificate of tax deferment on the
following grounds:-
If the unit violates any of the provisions of
the HPGST Act of the rules.
If the unit disposes of any of the fixed
assets mortgaged with the Government.
If the unit discontinues its business at any
time for a period exceeding six months.
If the unit fails to furnish adequate
security.
If the competent authority of the department
of industries recommends for cancellation of the certificate of deferment.
The
industrial units have been given the incentive of tax exemption or of the concessional
rate of central sales tax w.e.f. 27.7.1999 up to 31.3.2009 under the CST Act.
The incentive is not available on the sale of goods manufactured by the
breweries, distilleries, non-fruit/vegetable based wineries and bottling plants
(both of Country Liquor & Indian made Foreign Liquor).
(1)
INCENTIVE OF TAX EXEMPTION.
Total
exemption from payment of CST Act is available to those industrial units which come
into commercial production on or after 1.4.1999 and are located in the tax free
industrial zones i.e the tribal areas of the State.
(2)
INCENTIVE OF CONCESSIONAL RATE OF TAX .
All
the other industrial units except covered by the incentive described at (1)
above, are entitled for a concessional rate of one percent of CST.
The
general condition of eligibility are the same as are applicable for availing
incentive of tax exemption or concession under the HPGST Act excepting that the
dealer running the industrial unit is not required to obtain the certificate in
form E from the Assessing Authority. The industrial units which have commenced
commercial production before 1.4.1999 are also entitled for the incentive of
concessional rate of CST up to 31.3.2009.