The SEZs, by design, are treated as territories outside the Customs territory of India. So, the SEZ units are required to pay Customs duties on goods cleared in DTA, as applicable for such goods when imported. The SEZ units have long been demanding that they should be placed on par with export-oriented units (EOU) who, on their DTA sales, are required only to surrender the duty concessions availed on their inputs. The government has instead preferred to reduce the duty rates on their finished goods that go to DTA.
The process of paying less duty on the finished goods is much easier than tracing and reversing input-level concessions. The problem lies in the extent of reduction, which is only 1 per cent on goods such as chemicals and engineering products that normally attract 10 per cent or 7.5 per cent duty. On goods that attract higher duty rates, the duty reduction is substantial, but such goods are few.
The conditions for clearance at lower duty rates include commencement of production before March 31, 2025, minimum 20 per cent value addition, limit on DTA clearances at concessional duty at 30 per cent of the highest level of exports in the previous three years and bar on availing benefits under the Foreign Trade Policy (FTP) or duty drawback (DBK) on domestically procured inputs used in making the item being cleared into DTA. The additional documentation requirements include a certificate from the jurisdictional Development Commissioner (DC) regarding fulfilment of some of those conditions. It involves some delay and compliance costs that the SEZ units will factor while making their decisions.
The Central Board of Indirect Taxes and Customs (CBIC) has said that the bills of entry filed at the Customs portal claiming such concessions will go through the risk management system and faceless assessment procedure. The post assessment formalities such as examination, grant of “out of charge” order etc. will be handled by the authorised officers at the SEZ Customs stations. This procedural improvement should be extended to all SEZ to DTA clearances.
Most SEZ units procure some of their inputs from DTA. The supplies from DTA to SEZ are zero-rated under the Goods and Services Tax (GST) laws and are treated as exports under the SEZ laws. The supplies earn DBK under the Customs laws and can be counted for fulfilment of export obligations under the FTP schemes such as export promotion capital goods (EPCG) scheme. The FTP and DBK benefits translate into lower prices on such inputs for the SEZ units. Most SEZ units, especially those whose finished goods attract 7.5 per cent or 10 per cent duty, may not ask their domestic suppliers to let go benefits on such supplies and disturb their present arrangement in return for a 1 per cent concession.
The move to reduce the duty rates on SEZ to DTA goods is well intentioned but the meagre duty reductions for many goods and cumbersome, if not onerous, conditions for availing the concessions, may deter many SEZ units from taking the concession.
email: tncrajagopalan@gmail.com 
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