The Centre is considering giving full flexibility to SEZ units on selling their products in the international or domestic market, by removing the net foreign exchange earning obligation, an official tracking the matter has said.

Another reform being considered is allowing de-notification of vacant areas in SEZs so that domestic units can set up shop and take advantage of the infrastructure.

The easing of rules for SEZ units, to ensure that they remain attractive despite exhaustion of income-tax sops, may be part of the new five-year Foreign Trade Policy likely to be implemented in October. “Many of the reforms being considered by the government have been recommended by the Baba Kalyani Committee report submitted in December 2018. With the sunset clause on income-tax exemptions kicking in, idea is to come up with new incentives, so as to retain the attractiveness of the zones. The idea is to promote them as economic or employment zones,” the official told BusinessLine .

New proposals

The Commerce Ministry is in discussions with the Finance Ministry on the new proposals for SEZs.

By doing away with the NFE positive obligation (earning more in foreign exchange than spending), SEZ units will not feel compelled to export if they find a good market within the country. “This can easily work out as SEZ units, choosing to sell in the domestic market, can pay the Customs duty on inputs that they got an exemption for earlier while importing,” the official explained. So, in a way SEZs can function as a customs bonded zone, he added.

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