The 'Value Addition' Conundrum In GST Budgetary Support Refunds

Introduction

Under the erstwhile indirect tax regime in India, there were several area-based exemption schemes aimed at promoting industrial growth and economic development in specific geographically disadvantaged or special category states in India. The exemption was typically for a period of 10 years from the date of commencement of commercial production of finished products. This support was crucial for making these industries competitive and fostering employment in these regions.

Recognizing the need to continue supporting these industries that had set up operations based on these long-term incentives, the Government of India, through the Department of Industrial Policy and Promotion (now DPIIT), issued the Scheme of Budgetary Support¹ ('BSS') in the GST regime, for eligible manufacturing units in Jammu & Kashmir, Uttarakhand, Himachal Pradesh, and the Northeastern States. This scheme provides for a refund of the central share of Integrated Goods and