The commerce ministry has made a renewed push to permit corporations within the particular financial zones (SEZs) to promote items within the home market at a low responsibility, because it prepares a raft of proposals to interchange the present legislation governing these duty-free enclaves with a brand new piece of laws, official and trade sources instructed FE.
The ministry desires the levy to be decrease than the common customs duties that SEZ items are presently mandated to pay whereas supplying to the home tariff space (DTA). At the identical time, this levy can be sufficient to neutralise the benefits that SEZs get pleasure from vis-à-vis home producers. The concept is to allow Covid-hit SEZs to raised utilise their idle capacities and enhance gross sales.
“Both the commerce and the revenue departments are in talks on this issue. A decision will be taken soon,” stated the supply. Another supply stated, “Talks are also going on as to what could be the form of support to SEZs if this (lower duty) doesn’t materialise.”
The commerce ministry is concentrating on to introduce a brand new SEZ Bill within the monsoon session of Parliament, which is normally convened in July, stated one of many sources. A swift determination on the vital problem of help to woo new traders is, subsequently, the necessity of the hour.
Once thought-about to be drivers of future export development, SEZs have been dropping sheen after the federal government adopted in 2020 a sundown clause for granting a phased income-tax vacation for 15 years. This is in sync with the finance ministry’s acknowledged bid to chop the myraid of exemptions to make the nation’s tax system easier and extra sturdy. Only these SEZ items which began manufacturing on or earlier than June 30, 2020, now get a 100% I-T exemption on their export earnings for the primary 5 years, 50% for the subsequent 5 years and 50% of the ploughed-back export revenue for 5 years thereafter.
The commerce ministry believes that with out some form of help, it might be tough to attract traders to arrange items in these zones, particularly when the company tax has been decreased to as little as 15% to ascertain new manufacturing items wherever.
Earlier, the commerce ministry had prompt that SEZ items be allowed to promote items within the home market by paying the bottom tariffs at which India imports from its free-trade companions (zero responsibility normally). However, the income division was not eager on it on the bottom that it might present an unfair tax benefit to SEZ items vis-à-vis home producers exterior such duty-free enclaves.
However, now that many of the privileges that have been being loved by the SEZ items have ceased to exist, DTA producers can have a level-playing area as soon as a low responsibility to offset the remaining incentives nonetheless prolonged to corporations within the SEZs is imposed. In that case, the SEZ items could be allowed to promote within the home market to raised utilise their capability.
“The issue is that the situation on the ground has changed substantially over the past few years. So, policies for SEZs need to change as well to suit new realities,” stated one of many sources.
The commerce division intends to make these zones engines of export development once more, acutely aware of their immense potential to assist the nation realise the lofty merchandise export goal of $1 trillion by FY28, towards $422 billion in FY22.
SEZs offered manufactured items price Rs 50,033 crore within the home market in FY21, down from Rs 53,831 crore in FY20. Their home gross sales would soar considerably if the tax incidence drops, trade executives reckon.
However, exports of manufactured merchandise from the SEZs surged 60% till December final fiscal, in contrast with a 51% bounce within the nation’s total merchandise exports throughout this era.
Source: www.financialexpress.com”