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Exempt export units from 'sunset clause' to boost trade: SEZs to govt

They say frequent change in govt policies has led to 'trust deficit' in such export promotion zones and affected fresh investments

Dilip Kumar Jha  |  Mumbai 

Exempt export centric units from 'sunset clause': SEZs to govt

Exporters of goods and services from designated (EOUs) and (SEZs) have urged the government to exempt export-centric and employment-generating units from the sunset clause, to boost exports of goods and services from India.

In a letter addressed to the Union Finance Minister Arun Jaitley, the Export Promotion Council of and said that frequent change in government policies has led to a ‘trust deficit’ in such export promotion zones, affecting fresh investments from domestic and overseas investors.

Introduced in 2005, the SEZ Act had attracted huge investments in its initial years. But then, the government levied (MAT) and (DDT) in 2012. These levies worked as a speed breaker for capital inflows into these zones, which were initially planned to be tax free.


Source: Export Promotion Council of and EOUs

“Sudden change in the government policy restricted capital inflow into and After achieving an annual investment inflow of $43.52 billion in 2012-13, there was a slowdown in subsequent years. But, again, during 2016-17, the capital inflow hit a level of $65.27 billion. The investment inflow will jump by leaps and bounds if the government gives us a long-term policy,” said Vinay Sharma, Acting chairman, & SEZ.

Exports of goods and services slumped to $70.79 billion in 2015-16 after achieving a high of $87.55 billion in 2012-13, but recovered to reach $80.76 billion in 2016-17.

Meanwhile, exporters fear that the sunset clause, proposed by the Union Finance Minister, would withdraw all incentives offered currently to in and by 2020. This means, they would have to pay the same tax a manufacturer or a service provided pays in the (DTA).

and have made available all the facilities required for setting up of a business unit including infrastructure, customs house and banks within the notified area. Also, SEZ Act has also mentioned an exit clause for units. Even foreign investors can approach us to have all facilities in place without any hurdles. But, we require a stable policy from the government to retain investors’ trust,” said Sharma.

Meanwhile, import of goods into or either from overseas or from the DTA attract nil duty. But, exports to DTA from SEZ attract the effective rate of duty. However, exports to overseas are duty-free.

The implementation of (GST), however, has worsened business environment in the and EOUs, as units outside these notified areas do not want to sell their goods to the units within. This is because manufacturers inside these zones are required to either purchase goods with applicable from buyers or pay the levy from their own books.

Sellers outside the and do not want to claim input credit under GST, as it blocks working capital for months. This is why and business has been badly affected under the regime, said Sharma.

Currently, goods exported from attract nil duty while services suffer 18 per cent.

First Published: Mon, January 15 2018. 02:57 IST