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K.R. Srivats

New Delhi, Sept 20 Supply of goods from domestic tariff area (DTA) to special economic zone (SEZ) developers against payments made in rupees will now be entitled for duty neutralisation benefits, enabling the SEZ developers to procure goods from domestic manufacturers at international prices.

The Directorate General of Foreign Trade (DGFT) has given effect to the empowered Group of Ministers (eGoM) decision to allow duty entitlement passbook (DEPB) benefit to an exporter from DTA supplying to a SEZ developer/co-developer and receiving payments in rupees from that developer/co-developer. This DEPB facility will be available for supplies received with effect from February 10, 2006 – the date SEZ Act came into effect.

“The DGFT move would encourage SEZ developers to procure goods from domestic manufacturers rather than importing and this would in turn encourage domestic manufacturing and backward integration of SEZs,” Mr L.B. Singhal, Director General of Export Promotion Council for EOUs and SEZs (EPCES), told Business Line.

He said the DGFT had now made operational a facility that was envisaged in the SEZ Act and rules itself, but was not implemented so far because of stipulation that SEZ developer should make payment for supplies received from DTA in foreign currency.

It was pointed out that SEZ developers could not make payments in foreign currency as they were not exporters nor were their earnings in foreign currency. The eGOM had considered this matter at its meeting on August 7 and decided to give neutralisation benefits for payments made in rupees by the SEZ developer/ co-developer.

Mr Singhal expressed hope that the department of commerce would soon issue guidelines for allowing drawback facility in respect of supply of inputs from DTA to SEZ developers against rupee payments. “In such a situation, domestic manufacturers would have an option of either taking DEPB or drawback,” he said.

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