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The Ministry of Commerce
and Industry wishes to contest the idea of not allowing
the benefit of zero-rating to these zones, proposed in
the first discussion paper on GST, released on November
10 by the Empowered Committee of State Finance
Ministers.
It is in the process of writing a letter to the finance
ministry on the subject, sources told Business Standard.
The commerce ministry says any supply to the tax-free
zones from the Domestic Tariff Area (DTA) is, correctly,
treated as export. Similarly, supplies from SEZs to DTAs
have to be treated as imports. Doing so is the correct
position under the law, by their reading
In other words, says the commerce ministry, SEZs must
get uniform tax treatment, not split into zones for this
purpose. “The GST Act cannot supersede the SEZ Act.
These are contentious issues and would be taken up with
the department concerned. The SEZ policy is completely
transparent; there is nothing called a processing zone
and a non-processing zone,” the source said.
However, Asim Dasgupta, chairman of the empowered
committee and finance minister of West Bengal, had
earlier said the government would not extend any tax
benefit and incur loss of revenue is those areas within
SEZs where manufacturing work is not conducted.
At present, SEZs are given tax exemptions in the form of
duty-free import of goods from DTAs for development,
operation and maintenance of SEZ units. Under Section
10AA of the Income Tax Act, SEZs are given 100 per cent
tax exemption for the first five years, 50 per cent for
the next five years and 50 per cent of the ploughed-back
export profit for the next five years.
SEZs are also exempt from Minimum Alternate Tax under
Section 115JB of the Income Tax Act. These are also
exempt from central sales tax and service tax, state
sales tax and other levies imposed by state governments.
“There is no problem as long as the tax benefits re
available to the processing zones where the actual
manufacturing takes place and the units are housed.
Non-processing areas are non-bonded areas, which are not
customs-bonded and house social infrastructure like
schools, hospitals, malls, from where no transaction
will take place,” PricewaterhouseCoopers Senior Manager
Tapan Sangal said.
The government has so far approved 570 SEZs, of which
343 zones have been notified, while 101 are operational
at present.
Source :
The
Business Standard,
India,
dated
25/11/2009
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