Manufacturing SEZs may get duty concessions to sell in domestic market

NEW DELHI: The government is considering offering export units in special economic zones duty concessions to sell in the domestic market, a move aimed at helping them tide over the slump in global demand. Manufacturers in special economic zones (SEZs) enjoy zero duty on items they import but their finished products are subjected to full customs duty in the domestic market, making them more expensive than similar products from outside the SEZs.

“We are examining ways to provide duty concession to SEZ units to sell into DTA (domestic tariff area), which will help them survive and continue manufacturing till the external demand recovers”, a commerce department official told ET, adding that the matter has been taken up with the revenue department.

The units in SEZs need to become net foreign exchange positive in five years, that is, achieve higher exports than imports. However, falling demand from major foreign markets over the last few months has forced several manufacturers of CNG cylinders, pharmaceutical products and textiles to stall operations, affecting employment.

Exports from special economic zones (SEZs) declined 4.1 per cent in the three months to June, after recording 31 per cent growth for the whole of 2012-13. The government is assessing two ways to provide duty relief booster — duty be charged only on the imported content than on the final product; or charging preferential or zero duty on imports from countries with which India has signed free trade pacts.


“We are assessing the possibility where DTA buyer would pay duty on only the part which was imported instead of the final product, or, instead give 20 per cent duty relief on the products for a certain period, say one or two years,” the official said, adding that the facility could be converted into an export obligation at a future date.

The lobby group of exporters from export-oriented units and SEZs has asked the government to provide duty benefits on items imported from countries or regions with which India has a free trade agreement or a preferential trade agreement, like ASEAN, Korea, Japan and SAFTA.

“If goods are imported from these countries, they are charged concessional tariff. The same rate should be applicable on those items if sold from SEZs into DTAs,” said PC Nambiar, chairman of Export Promotion Council for EOUs and SEZs.

The commerce department official said the government would also urge manufacturers of countries with which India has free trade agreements to set up shops in SEZs and sell into the DTAs at the same duty.