As a result, SEZ
developers have continued to push for an exemption from MAT, arguing that the provisions make SEZs an unfavorable investment sector. Case in point, of the 370 notified SEZs, only 234 are operational, according to official statistics.
The commerce department has also pointed out that many SEZs are also operating at sub-par levels with the number of current units being much lower than the original expectation.
The commerce department has again floated the idea that duties be reduced when goods are cleared by SEZ
to domestic areas, considering that same goods could be imported through the free trade agreement (FTA) route at nil rate, sources said.
Earlier, the department had proposed allowing SEZ
units to sell goods in the domestic market at the lowest import duties the country offers to its FTA partners.
According to the SEZ ACT of 2005, supplies made from an SEZ to a domestic tariff area (DTA) are to be treated as import into India and hence Customs duties are to be paid by the importer on clearance of the goods. This is because an SEZ is a specifically delineated duty-free enclave and is a deemed foreign territory for the purpose of trade operations, duties and tariffs. Currently apart from Customs duty, integrated goods and services tax is also paid by manufacturers in a SEZ when they sale to domestic players.
However, the revenue department has reiterated its stand that permitting SEZs to sell goods in DTA at zero duty (the rate at which most products are imported from India’s FTA partners) will cause significant revenue losses to the government, sources said. Also, it will provide an unfair duty advantage to SEZ units as compared to domestic manufacturers based outside such enclaves, the Revenue Department believes.
Approving job work for sectors like gems and jewellery and reviewing the minimum area requirement are also planned. SEZ units are currently allowed to undertake job work for export on behalf of DTA units in certain sectors. This is subject to the condition that the finished goods are exported directly from SEZ units and export documents are made in the name of the DTA unit.