Excise on small scale industries

Small Scale Industries
The contribution of Small Scale Sector in the industrial growth of the Indian economy and to the Gross Domestic Product is significant, besides the potential for employment generation. Keeping this into consideration, special provisions of Central Excise are applicable to small-scale units.

Exemption to SSI
• SSI are eligible for exemption from duty under Notification No. 8/2003-CE dated 1-3- 2003. The SSI unit
need not be registered with any authority.
• Broadly, items generally manufactured by SSI (except in tobacco, matches and textile sector) are eligible
for SSI exemption. Some items like pan masala, matches, watches, tobacco products, Power driven pumps for water not confirming to BIS, products covered under compounded levy scheme etc. are specifically excluded, even when these can be manufactured by SSI. Some items like automobiles, primary iron and steel etc. are not eligible for SSI exemption, but anyway, these are beyond capacity of SSI unit to manufacture.
• Unit whose turnover was less that Rs. 4 crores in previous year are entitled to full exemption upto Rs. 150
lakhs in current financial year.

• SSI units manufacturing goods with brand name of others are not eligible for exemption, unless the
goods are manufactured in rural area.
• Turnover of all units belonging to a manufacturer will be clubbed for calculating SSI exemption limit.
• Clubbing is also possible if two units are sham or bogus or if there is unity of interest and practically they
are one.While calculating limit of Rs. 400/150 lakhs –
• Turnover of Exports, deemed exports, turnover of non-excisable goods, goods manufactured with other’s
brand name and cleared on full payment of duty, job work done under notification No. 214/86-CE, 83/94-
CE and 84/94-CE, processing not amounting to manufacture, strips of plastics used within factory is to be
excluded.
• Value of intermediate products (when final product is exempt under notification other than SSI exemption
notification), branded goods manufactured in rural area and cleared without payment of duty, export to Nepal and Bhutan and goods cleared on payment of duty is to be included.
• Value of turnover of goods exempted under notification (other than SSI exemption notification or job
work exemption notification) is to be included for purpose of limit of Rs. 400 lakhs, but excluded for limit of
Rs. 150 lakhs.

GOODS NOT ELIGIBLE FOR SSI CONCESSION
Many of goods manufactured by SSI are eligible for the concession. However, some items are not eligible
(some of the items not eligible for SSI exemption are eligible for exemption under different notifications. Some
are not exempt at all).

Thus, SSI exemption is available only if the item is covered in this notification.

Broadly, items generally manufactured by SSI (except in tobacco, matches and textile sector) are eligible for
SSI exemption. Some items like pan masala, matches, watches, tobacco products, Power driven pumps for
water not confirming to BIS, products covered under compounded levy scheme etc. are specifically excluded,
even when these can be manufac-tured by SSI. Some items like automobiles, primary iron and steel etc. are not
eligible for SSI exemption, but anyway, these are beyond capacity of SSI unit to manufacture.

Goods with other’s brand name not eligible, but packing material with other’s brand name eligible – Goods
manufactured by an SSI unit with brand name of others are not eligible for SSI concession, unless goods are
manufactured in a rural area.

However, SSI exemption will be available to all packing materials meant for use
as packing material by or on behalf of the person whose brand name they bear.

OTHER PROVISIONS IN RESPECT OF CONCESSION TO SSI
Other provisions for concession to SSI are as follows. ‘Value’ for calculating SSI exemption limit
Value for purpose of calculating the SSI exemption limit of ` 150 and ` 400 lakhs is the ‘Assessable Value’ as per
section 4, i.e. transaction value.
However, when goods are assessed on basis of MRP (Maximum Retail Price), the ‘value’ will be as determined
under section 4A.

SSI exemption available in respect of goods exported to Nepal & Bhutan
The SSI exemption is available for home consumption, i.e. for consumption within India. However, explanation
to SSI exemption notifications make it clear that clearances for home consumption shall also include clearances
for export to Bhutan & Nepal. Thus, exports to Nepal & Bhutan will qualify for SSI exemption, whether the Indian
exporter receives payment in Indian Rupees or foreign exchange.

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