Stricter obligations for SEZs on cards to boost exports

DEEPSHIKHA SIKARWAR & AMITI SEN

TIMES NEWS NETWORK[ TUESDAY, APRIL 10, 2007 03:11:21 AM]

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.

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