Stricter obligations for SEZs on cards to boost exports

NEW DELHI: To ensure that the much-touted special economic zones (SEZ) actually become vehicles for boosting exports, the revenue department is pitching for a review of the net foreign exchange criterion to make it more stringent.

There are 15 instances where supplies from SEZs to the domestic tariff areas (DTA) are considered deemed foreign exchange earning under the existing SEZ rules. The revenue department wants the list to be shortened as it feels that SEZs should be undertaking actual exports to meet the export obligation.

The commerce department, however, holds a contrary view. It feels there is no problem with the existing classification and there was no need to change it. “These are widely-accepted norms and the classification for foreign exchange earning for SEZs is similar to that of EoUs,” an official said. The issue, however, is expected to be taken up at the next EGoM meeting.

SEZ units are required to be not only net foreign exchange earners but under the expected new guidelines, their exports would also have to be more than whatever they source from the DTAs.

The revenue department is of the view that since the zones have been given huge tax benefits, the emphasis should be on actual physical exports being more than imports, an official said. The zones should not rely on deemed exports to achieve their net forex earner status.

The official said the objective behind setting up the zones was to boost exports from the country and garner a larger share of the world market, and this could be done if the focus remains on physical exports. The department wants pruning of certain deeming provisions that have been spelled out in the rules.

Supplies from the SEZs to the DTA are considered as foreign exchange earnings for 15 specified cases including goods sold under various duty exemption schemes of the commerce department, viz, the export promotion capital goods scheme and the advance licence scheme, supplies are made for various government-recognised projects and supply of IT agreement items under notified zero duty telecom and electronic items.