Govt may have to amend SEZ Act to align it with GST

The Commerce Ministry is in the process of preparing a note on the changes required in the Special Economic Zone (SEZ) Act, an official said.

The duty drawback norms, under which exporter is compensated for duties suffered during the course of production of goods, too would be required to be aligned with the new indirect tax regime.

Under the present norms, units in the SEZ get exemption from service tax and the developers get exemption from customs/excise duties for development of zones for authorised operations. “Section 26 of the SEZ Act has to be amended to align it with the GST law. There is also a meeting on Monday with the customs authorities to discuss the movement of goods to and from SEZs in the context of GST,” the official added. 

The section talks about exemptions, drawbacks and concessions to every developer and entrepreneur. SEZs are export hubs which contribute about 16 per cent to the country’s total outbound shipments. The Commerce Ministry is taking steps to revive investors interest in these zones. It has asked the Finance Ministry to extend sops like rollback or reduction in the minimum alternate tax. Exports from these zones logged a marginal growth of 0.77 per cent to Rs 4.67 lakh crore in 2015-16. It was Rs 4.63 lakh crore in 2014-15.

In the biggest tax reform since Independence, the Rajya Sabha last week approved the GST Bill to replace a raft of different state and local taxes with a single unified value added tax system to turn the country into world’s biggest single market.

Meanwhile, luxury cars, FMCG products, consumer durables, electronics items and readymade garments will become cheaper once GST is rolled out next year, but mobile phones, banking and insurance services, telephone bills as well as air travel will be dearer due to higher tax.

Under the new indirect taxes regime, likely to take effect from April 1, 2017, levy on manufactured goods will come down, while consumers may end up spending more as service tax burden would go up, as GST is a consumption based tax.

While the government is sure of the benefits the Goods and Services Tax will bring to the common man, it says it is still early days to predict which items will become more expensive or cheap. 

Logistics sector, which accounts for nearly 14 per cent of the GDP, could see savings to the tune of $200 billion annually on implementation of GST, which will ensure faster movement of goods and less idle hours, say experts. With the introduction of Goods and Services Tax, many taxation procedures will come down, nearly halving the cost of inventory as customers will not need to pile up stocks in different warehouses, say experts.