Ministries cross-connection on cess puts power SEZs on the blink
SEZs with captive power plants like the RIL SEZ in Haryana, hang in balance even as the finance and commerce ministries are fighting over the cess to be imposed on power sold by such SEZs for non-SEZ purposes.
By Amiti Sen, TNN |
NEW DELHI: The fate of power SEZs, including proposals by Adani and Essar groups, and SEZs with captive power plants like the RIL SEZ in Haryana, hang in balance even as the finance and commerce ministries are fighting over the components of the cess to be imposed on power sold by such SEZs for non-SEZ purposes.
While the commerce ministry wants the cess to include just the fuel excise duty component which the developers did not have to pay, the finance ministry wants duties on capital goods and construction material should also be included.
Speaking to ET, commerce ministry officials said there was no logic in making power SEZs and SEZs with captive power plants cough up excise for capital goods and construction material for the power to be sold in the domestic tariff area. “Even mega power projects are exempt from paying duties on capital goods and construction material,” an official argued.
The finance ministry’s argument, however, is that tax exemptions are provided in SEZs only for activities within the zone. If the power is not being used for activities within the zone, the government should apply duties on everything that went into the generation of power, it says.
The formula, which is being worked out by the power ministry for taxing sale of power by SEZs for non-SEZ purposes, should therefore not just include cess on fuel used for generating the power but for other inputs as well, finance ministry contends.
The commerce ministry is opposing the proposal tooth and nail. “We believe it is unfair to apply so much cess on power sold outside SEZs. We are strongly opposing the finance ministry’s proposal,” the commerce ministry official said.
The finance ministry has also been opposing the concept of power SEZs. Earlier this year, in a letter to the commerce department, the revenue department pointed out the SEZ Act was meant to give sops for boosting exports, and standalone power SEZs defied the spirit of the SEZ Act.
While the commerce ministry wants the cess to include just the fuel excise duty component which the developers did not have to pay, the finance ministry wants duties on capital goods and construction material should also be included.
Speaking to ET, commerce ministry officials said there was no logic in making power SEZs and SEZs with captive power plants cough up excise for capital goods and construction material for the power to be sold in the domestic tariff area. “Even mega power projects are exempt from paying duties on capital goods and construction material,” an official argued.
The finance ministry’s argument, however, is that tax exemptions are provided in SEZs only for activities within the zone. If the power is not being used for activities within the zone, the government should apply duties on everything that went into the generation of power, it says.
The formula, which is being worked out by the power ministry for taxing sale of power by SEZs for non-SEZ purposes, should therefore not just include cess on fuel used for generating the power but for other inputs as well, finance ministry contends.
The commerce ministry is opposing the proposal tooth and nail. “We believe it is unfair to apply so much cess on power sold outside SEZs. We are strongly opposing the finance ministry’s proposal,” the commerce ministry official said.
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The finance ministry has also been opposing the concept of power SEZs. Earlier this year, in a letter to the commerce department, the revenue department pointed out the SEZ Act was meant to give sops for boosting exports, and standalone power SEZs defied the spirit of the SEZ Act.
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