TheNorth Eastern and Hilly Stateshave not been provided exemption from tax refund till March, 2027 under GST. The GST Council in the meeting held on 30.09.2016, had decided that all entities exempted from payment of indirect tax under the then existing tax incentive scheme shall pay tax in the GST regime. It was also decided that the decision to continue with any incentive given to specific industries in existing industrial policies of States or through any Schemes of the Central Government, shall be with the concerned State or Central Government and in case the State or Central Government decides to continue any existing exemption/incentive/deferral Scheme, then it shall be administered by way of a reimbursement mechanism through the budgetary route, the modalities for which shall be worked-out by the concerned State/Centre.

The Central Government, w.e.f. 01.07.2017, has notified a Scheme for grant ofBudgetary Support to the eligible units which were availing exemption or refund benefit, for the residual period of exemption under erstwhile Central Excise regime. The support under the scheme will be equal to the share of Central Government of CGST/IGST paid by the unit after utilisation of credit of Central and Integrated Tax.

This was stated by Shri Shiv Pratap Shukla, Minister of State for Finance in written reply to a question in Rajya Sabha.

Tax refund exemption: north eastern and hilly states excluded; affected units to receive budgetary support via reimbursement mechanism. States are not granted continued exemption from tax refunds under GST for North Eastern and Hilly States through March 2027; continuation of prior incentives must be administered by reimbursement rather than as direct exemptions. A Budgetary Support Scheme effective 1 July 2017 provides compensation to eligible units equal to the Central share of CGST/IGST paid after utilisation of central tax credits, with modalities to be worked out and administered by the State or Central Government.