The government on Thursday approved refund of value added tax (VAT) it had collected from
industries in two union territories -- Daman and Diu, and Dadar and Nagar Haveli, which enjoy tax holiday.

"The Union Cabinet gave its approval to the promulgation of the Daman and Diu VAT (Amendment) Regulation 2007 and the Dadra and Nagar Haveli VAT (Amendment) Regulation, 2007 by the President under article 240 of the Constitution," Information and Broadcasting Minister Priyaranjan Dasmunsi said.

He said the measure will enable the government to refund the net negative tax to the assesses faster and also simplify the procedure.

The industrial units in these UTs already enjoy tax holiday under the government's scheme to encourage new investment in industrially underdevelopment regions.

"After the implementation of VAT in 2003, the units were forced to pay 4-12.5 per cent tax on raw material bought from the market, but they could not recover the same as they sold their goods at zero duty rate," said a Finance Ministry official.

He said after the Cabinet decision will enable the companies to get refund of these taxes. A large number of electronic and FMCG manufacturing units have been set up in these tax havens.