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This study, undertaken for the Tax Research Unit set up at NIPFP by the Department of Revenue, Ministry of Finance, focuses on the exemptions accorded to small scale units within the central excise regime. The objective of the study is to assess the impact of these exemptions on the units. The conclusion drawn first is that while there is agreement on the need for an exemption threshold, the form and level should be based on the rationale for providing the exemption, and second, the costs to the exchequer of this exemption clearly exceed the benefits derived by the intended beneficiaries, although they might fall short of the benefits derived by all beneficiaries.

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