The Hindu Business Line : Supplies to SEZs — Ministry freezes duty drawback payments

THE Finance Ministry has put on hold its earlier instructions allowing duty-drawback payments to be made on supplies from Domestic Tariff Area (DTA) units to units in the Special Economic Zones (SEZs).

The move comes in the wake of the Revenue Department realising that Chapter XA of the Customs Act, 1962 was yet to be operationalised through a notification. Chapter XA was inserted through the Finance Act 2002 and details special provisions relating to SEZs. Section 76-I of Chapter XA provides that any goods admitted to SEZ from the DTA would be eligible for drawback under Section 75, as if such goods are export goods.

"It has come to fore that Chapter XA of the Customs Act was supposed to come into existence from a date to be notified. So far the said date has not been notified. Consequently, these proposed provisions remain ineffective for the time being. Accordingly, the amended provision of duty drawback rules in this regard too cannot take effect till such time," the Revenue Department said in a circular issued on January 8.

The Finance Ministry has now held that its April 2003 instructions concerning payment of duty drawback to the supplies from DTA unit to the SEZ unit would become operative from the date Chapter XA of the Customs Act, 1962 comes into effect.

The Customs and Central Excise duty drawback rules were amended on March 3, 2003 to treat supplies made to the SEZ by the DTA units as physical exports and also make them eligible for duty drawback. Following the amendments, the Revenue Department issued a circular on April 1, 2003 with detailed instructions on the duty drawback payments to be made on the supplies effected by DTA units to SEZs.

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