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Panel on tax refunds for exports from SEZs, EOUs to submit report on Dec 20

New Delhi, November 6, 2022

Under RoDTEP, various central and state duties, taxes, and levies imposed on input products, among others, will be refunded to exporters

The government panel tasked to determine tax refund rates for overseas shipments from special economic zones and export-oriented units under export promotion scheme RoDTEP will submit its report on December 20, an official said.

These sectors were left out in the earlier exercise which was conducted in August 2021.

The government in August last year had announced the rates of tax refunds under export promotion scheme Remission of Duties and Taxes on Exported Products (RoDTEP) for 8,555 products such as marine goods, yarn and dairy items.

As SEZs (special economic zones) and EOUs (export-oriented units) were kept out of the scheme in the list notified that time, the industry was demanding to include them in the scheme.

Under RoDTEP, various central and state duties, taxes, and levies imposed on input products, among others, will be refunded to exporters.

The three-member committee is chaired by former secretary G K Pillai. The other two members include former CBEC member Y G Parande and former customs member Gautam Ray.

"The committee will submit its report on December 20 and based on that decision will be taken," the official said.

The Directorate General of Foreign Trade (DGFT) had stated that the committee would determine RoDTEP rates for AA (advance authorisation)/ EOU/ SEZ exports; and give supplementary report/recommendations on issues relating to errors or anomalies, with respect to the RoDTEP schedule of rates notified last year.

Sunil Rallan, Chairman and Managing Director, J Matadee Free Trade Zone Pvt Ltd, said that the principle base of the scheme is to refund embedded taxes which are not covered by GST (Goods and Services Tax) law and SEZ units' inputs from domestic tariff areas, so the RoDTEP scheme should include these units also.

"At present, we are exporting taxes also with the products from SEZs. RoDTEP is not a subsidy, it is a refund of taxes. Keeping SEZs out of the scheme would not be reasonable. We have been representing the government on the subject. RoDTEP rates applied on domestic goods should be applied in a similar way to SEZs also," he said.

Rallan said that the government should also fix a timeline to introduce the Development of Enterprises and Services Hub Bill, 2022 (DESH Bill), which will replace the Special Economic Zones (SEZ) Act, in the parliament as investors are waiting for that law.

In the Union Budget this year, the government proposed to replace the existing law governing Special Economic Zones (SEZs) with a new legislation to enable states to become partners in 'Development of Enterprise and Service Hubs' (DESH). The existing SEZ Act was enacted in 2006 with an aim to create export hubs and boost manufacturing in the country. However, these zones started losing their sheen after imposition of minimum alternate tax and introduction of sunset clause for removal of tax incentives.

These zones are treated as foreign entities in terms of provisions related to customs.

The industry has time and again demanded continuation of tax benefits provided under the law. Units in SEZs used to enjoy 100 per cent income tax exemption on export income for the first five years, 50 per cent for the next five years and 50 per cent of the ploughed back export profit for another five years.

As on October 14, 2022, the government has given formal approvals to 424 SEZ developers, out of which 376 are operational. These zones have attracted about Rs 6.5 lakh crore investments and employ about 28 lakh persons.

During April-September this fiscal, exports from these zones rose by 32.17 per cent to about Rs 5.93 lakh crore (USD 75.5 billion). It was about Rs 10 lakh crore in 2021-22 as compared to Rs 7.6 lakh crore in 2020-21.

[Press Trust of India]

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