Govt likely to give more sops to units in special economic zones

The government is considering a proposal to allow units in special economic zones (SEZs) to sell goods outside these zones in the country with concessional duties to help them utilise idle capacities.

“We will soon hear a decision on allowing SEZ units to sell goods in the domestic tariff area (DTA) on a duty foregone basis (on raw material) rather than the current arrangement of full Customs duties,” said Bhuvanesh Seth, the newly-appointed chairman of the export promotion council for EOUs (export oriented units) and SEZs. The council also held a meeting on this issue with the Department of Commerce earlier this week.

With this incentive, manufacturers in SEZs that have spare capacity will be able to boost production.

SEZs are areas within the country that have different economic regulations and are considered foreign territory. They not only aid foreign investment, but are export hubs. Companies operating in such zones get tax sops from the government and also pay lower tariffs when the goods are exported and not sold outside these zones.

At present, SEZs pay full Customs duty in case a product is sold outside these zones. The council has urged the government to allow the sale of goods in the DTA zone. Duty will be charged only on the basis of raw material cost and exclude the value addition done in India.

Seth also said that the government needs to improve infrastructure in SEZs and make the processes and procedures more business friendly. Besides, SEZs should be declared as ‘infrastructure’ to get priority lending from banks. There is also a need to improve the connectivity from SEZs to ports.

“Have submitted a proposal to cover SEZs and EOUs under the Remission of Duties and Taxes on Export Products (RoDTEP) scheme. The Department of Commerce has assured that a committee is being set up to finalise the rates for exports from SEZs,” he added.

Exports recovery

Seth added that with the recovery in export markets, exports from SEZs are increasing.

During the June quarter, merchandise exports from SEZs grew 91 per cent year-on-year, while services exports grew 8 per cent. “We are expecting that this year the exports from SEZs will be definitely more than the pre-Covid level of Rs 7.84 trillion in 2019-20 (merchandise Rs 3.11 trillion and services Rs 4.73 trillion).  We should be able to achieve about Rs 8 trillion,” he said.

During the previous financial year, total exports from SEZs were Rs 7.55 trillion, a decline of 4 per cent year-on-year. Merchandise exports fell by over a fifth to Rs 2.46 trillion, while services export grew 8 per cent to Rs 5.09 trillion.