NEW DELHI: The Commerce Ministry is working on a proposal to allow Special Economic Zone (SEZ) units to sell products outside these tax-free enclaves at concessional duty rates. An SEZ area is considered to be a foreign territory for trade operations and duties and are mainly set up for the export purpose. However, goods can be supplied from an SEZ unit to a DTA (domestic tariff area or outside SEZ) buyer on payment of appropriate Customs duty as products coming from these zones are treated as imports into the country. The SEZ players have demanded that they be allowed to sell their goods in DTA on same terms as applicable under free trade agreements (FTAs) signed by India with different countries.
In essence, they want that the benefit of low or nil duty under an FTA should be extended to their products sold in domestic markets. India has signed several FTAs with countries, including Japan, Malaysia, Asean (the 10-nation South East Asian bloc) and South Korea, under which it permits imports of a host of goods at a significantly low or nil duty. “Such a decision would help boost the manufacturing sector of the country. Although SEZs are treated as foreign entity for trade purposes, they are set up within the Country and they employ local people,” an official said.
The issue was recently discussed by the Commerce Ministry. However, experts take the line that domestic manufacturers would lose competitiveness if SEZ units are allowed to sell products at concessional duties. Export Promotion Council for SEZ and EoUs (EPCES) Chairman
Mr. Rahul Gupta stressed that the proposal would not affect domestic manufacturing as SEZ units use local raw material for manufacturing and also provide jobs here. “SEZs should be allowed to sell their goods at best FTA rates to increase manufacturing in these zones,” he suggested.