Union Finance Ministry has extended the tax holiday for Jammu and Kashmir for 10 years giving an indication that the same extension may be offered to other states like Himachal Pradesh, Uttarakhand and Sikkim also soon.

In a recent notification, the government said, "In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than goods specified in Annexure appended hereto, and cleared from a unit located in the state of Jammu and Kashmir, from so much of the duty of excise or additional duty of excise, as the case may be, leviable thereon under any of the said Acts as is equivalent to the duty payable on value addition undertaken in the manufacture of the said goods by the said unit."

Though the presence of pharmaceutical companies in J&K is not significant, the notification exempting J&K from excise duty is significant as many see this development as a precursor to the extension of tax holiday status to other important states like Himachal Pradesh and Uttarakhand where there are a large number of pharmaceutical companies.

Earlier, there was apprehension among the more than 500 pharmaceutical units, both big and medium companies, about what was in store for them as the tax exemption is coming to an end soon. Hundreds of these companies had migrated to these tax holiday states some years back to exploit the tax benefits. If the government does not extend the tax holiday, these companies may think of going back to their home states as operating in these hilly states without tax benefits is a costly affair.

With the government announcing tax holiday extension in J&K, there is hope among the other tax holiday states about the tax holiday extension in their states too.