June 22: FMCG giant Dabur has moved court against the Central and Uttarakhand government for denial of various concessions that were available during the pre-GST era. Dabur has filed a petition in Uttarakhand high court regarding the rejection of tax sops for investment in backward areas of the state.
With this, Dabur has joined the list of seversal other FMCG players who have filed petitions in the matter after being denied of concessions promised during the pre-GST era. Prior to the implementation of GST, capital goods that went into production of goods were given area-based exemptions. The idea behind this was to attract more investment in backward areas of states by offering tax concessions.
However, the goods have been now moved under taxable category. Dabur was handed a ten-year the holiday in relation to capital goods. Additionally, tax discrimination and lack of clarity in GST regulations about the tax benefits have also been pointed out in the petition.
The matter is also unclear among tax experts, who say that while transition of credits on capital investments is allowed under GST, there lacks a clarity regarding the investments made in industrially marginalized areas. Following the stoppage of tax exemptions for backward areas, the High Court too had earlier issued notices to Centre, the GST Council, the state government and tax officials over the absence of transitional credit for capital goods.
Abhishek Rastogi, who is the lawyer for one of the petitioners, has been quoted as saying that it was legitimate to expect that proportionate credit on capital goods were provided, adding that the credit was allowed also in the present regime.
As for companies like Dabur , who have made huge investment in the backward areas of the Uttarakhand, the impact could be huge. Major firms like Hindustan Unilever and Godrej Consumer have also been relying upon manufacturers from backward areas for sourcing various products.