DIRECT TAXES
| Finmin plans to tax goods sold in SEZs Fri, 10 Sep 2010 22:36:35 GMT |
| The Economics Times Finmin plans to tax goods sold in SEZs NEW DELHI: The finance ministry has proposed to tax goods sold in a special economic zone (SEZ). The move aims to check diversion of goods to the domestic market without payment of duty, the revenue department of the ministry said. As per developers, the proposed move is against the SEZ Act which says that goods can only be taxed if they go out of the zone. The issue will be discussed in the meeting of the central body for SEZ approval and rule making. “While movements from processing area can be monitored, further movements from non-processing area to the domestic tariff area (area outside the zones) cannot be monitored in the absence of defined entry/exit point,” revenue secretary Sunil Mitra pointed out in a letter to commerce secretary Rahul Khullar. Goods, which are removed from a processing area to a non-processing area against orders, can easily be removed from there to the DTA without paying duties (import duties), Mr Mitra wrote. If implemented, the move could result in taxation of all goods once they move from the processing area to the non-processing area. “For something like textiles, imposing taxes may not make much of a difference, but if duties are to be paid for inputs such as power and steel, it would certainly drive up costs for carrying out authorised activities in the non-processing areas such as setting up and running hospitals and schools,” a Kolkata-based SEZ developer pointed out. While the revenue department has suggested that SEZ rules be changed to allow for duties to be levied, experts say that this would not hold as it would be in contravention of the SEZ Act. “The SEZ Act (section 30) says that goods removed from SEZs are subject to taxation and even if the rules are changed to impose duties on sale to non-processing area, from the legal point of view provisions in the SEZ Act should hold,” SEZ expert Hitender Mehta from Vaish Associates pointed out. Taxing goods moved to a non-processing area from a processing area would imply that the government was recognising only the processing area as a special zone which goes against the spirit of the SEZ policy, Mr Mehta added. The board of approval for SEZs, the inter-ministerial body for approving SEZs and framing rules, will now examine the concerns raised by the revenue department and see how they could be best sorted out. |
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