The Hindu Business Line : Cenvat credit facility allowed for supplies to SEZ developers

The Revenue Department has now granted such a facility following the empowered group of ministers on Special Economic Zones decision on this matter.

K.R. Srivats

New Delhi, Jan. 3 Domestic manufacturers of goods including steel and cement have cause for cheer, with the Finance Ministry now extending the facility of cenvat credit to such manufacturers for goods supplied from domestic tariff area (DTA) to SEZ developers.

The Revenue Department has now granted such a facility following the empowered group of ministers on Special Economic Zones (EGOM) decision on this matter.

With this move, domestic manufacturers can avail cenvat credit on the duty incurred on inputs used for manufacturing the end products supplied to SEZ developers. Already, domestic manufacturers were entitled for cenvat credit in respect of goods supplied to SEZ units.

“The Finance Ministry move would enable domestic manufacturers to supply goods to SEZ developers at competitive rates. A SEZ developer had the option of importing the goods from outside the country,” Mr L.B. Singhal, Director General of Export Promotion Council for EOUs and SEZs (EPCES), told Business Line.

Backward integration

He said the Finance Ministry’s move would help in backward integration of SEZs with the domestic economy and spur economic activity within the country.

The EPCES had taken up this matter with the Commerce and Industry Minister, Mr Kamal Nath, at the council’s annual general meeting held on September 16 last year. This issue was later taken up at the EGOM, which agreed that the cenvat credit facility would be extended for goods supplied to SEZ developers.

In the first week of August 2008, the EGOM had decided that for supply of goods from DTA to SEZ units and SEZ developers, service tax would be refunded, irrespective of whether the service is rendered inside or outside the SEZ. This would be done so long as the goods supplied related to authorised operations of the SEZ unit and SEZ developers.

Drawback facility

For goods supplied from DTA to the SEZ developer, the EGOM had agreed that the drawback facility would be granted even if payment was received in Indian rupees. Similarily, EGOM had also decided to recommend to RBI that SEZs should be treated as infrastructure projects rather than real estate projects.

Mr Singhal observed that guidelines in respect of these three decisions were yet to be issued though they were taken in August and October last year.

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