The Hindu Business Line : Riders on SEZ duty-free sops likely

THE Finance Ministry is set to attach several riders to the major entitlement extended to special economic zones (SEZs) on procurement of duty-free equipment, raw materials and components. This is being done to prevent any possible misuse of the duty exemption.

Cars and other vehicles imported or procured locally may not be given the duty-free benefit. Similarly, goods imported or procured locally for personal consumption may not qualify for the duty exemption, said sources.

The official amendments to the Finance Bill 2002 clearly stipulate that rules would be framed by the Central Government specifying the requirements relating to goods or class of goods admissible to the SEZ and the nature of operations to which such goods or class of goods would be subjected to. The arrangements for customs control in the SEZ too will be specified in the regulation, with the designated officer having the right to carry out checks, at any time, on the goods stored or kept in the zone. The Revenue Department is in the process of firming up the rules, said officials.

Supplies to the SEZs would be considered as physical exports for the purpose of duties, tariffs and Central sales tax. This will enable suppliers from the domestic tariff area (DTA) to the SEZ to claim Duty Entitlement Pass Book (DEPB) credit and duty drawback in lieu of deemed export benefits.

The Finance Ministry has, however, made no change to the definition of export in the Customs Act. "While supplies to the SEZs would be given all benefits associated with export, there has been no alteration in the definition of export in the Customs Act as this could have wider implications on the other provisions'', said official sources.

Keeping this in view, the Finance Ministry decided to incorporate special provisions relating to SEZs in the official amendments to the Finance Bill 2002, they added. Any goods admitted to an SEZ from the DTA would be chargeable to export duties at such rates as are leviable on such goods then exported.

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Riders on SEZ duty-free sops likely