The commerce and industry ministry is trying to persuade the revenue department to allow non-export manufacturing units that operate within SEZs to take advantage of the infrastructure available in the zones to produce only for the domestic market. allow.
“The revenue department is examining the details of the proposal for domestic manufacturing and is yet to give its consent. But the commerce ministry continues to push for it as it believes it will not cause any revenue loss to the exchequer, while helping manufacturers improve their efficiency and SEZs to utilize their spare capacities. business Line.
tax benefits
As per the proposal, if manufacturing units are allowed to set up shop in SEZs for domestic sale, they will not be entitled to any tax benefits accruing to SEZ units, which includes zero rating of GST. On the taxation front, they will be treated as any other entity in the country outside SEZs, and their sale in the domestic market will not attract customs duty.
“There are many manufacturing units who want to set up shop in SEZs not because of tax benefits but because of the excellent infrastructure that exists there. Competitive infrastructure with integrated real estate, power and transport facilities and smooth administrative processes is a big attraction,” the official said.
Also, most of the SEZs in the country are operating at low capacity, and allowing domestic manufacturing units will improve space utilization. With business bearish related to the pandemic, SEZ developers are keen to take more.
Baba Kalyani Panel
This proposal was also reflected in the recommendations made by the Baba Kalyani-led committee set up by the Ministry of Commerce and Industry to study India’s current SEZ policy. The objective of the committee was to evaluate the SEZ policy and make it WTO friendly, suggest measures for optimum utilization of vacant land in SEZs, suggest changes in SEZ policy based on international experience and merge SEZ policy with other government schemes. . Coastal Economic Zone, Delhi-Mumbai Industrial Corridor, National Industrial Manufacturing Zone and Food and Textile Park. The committee had submitted its recommendations in November 2018.
The commerce ministry is also looking at proposals made by SEZ developers and units to allow existing SEZ units to sell part of their product in the domestic market at a lower customs duty to free trade agreement partners such as South Korea or Japan. are presented.
“Here, one really needs to look at the items that are being imported from the FTA partner countries and maybe extend the same conditions to the items from SEZ units. This proposal is also being discussed with the Revenue Department.
According to government data, there are 265 operational SEZ units and 425 units in India that have been formally approved with a total investment of Rs 6,07,679 crore as of 31 December 2020. Exports from SEZs declined 7 per cent to ₹5,53,396 crore (YoY) in the April-December 2020-21 period.
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