Domestic supplies to SEZs to get duty rebates

Domestic supplies to SEZs to get duty rebates

New Delhi: Consignments from domestic area to customs bound special economic zones (SEZs) should be treated as exports, thus becoming eligible for duty rebates as applicable to offshore shipments, the revenue department has clarified.

“The settled position that rebate under Rule 18 of the Central Excise Rules, 2002, is admissible for supplies made from Domestic Tarrif Area (domestic market) to SEZ ...," the Central Board of Excise and Customs has said in a directive to its field staff.

The Rule 18 grants rebate on duty on raw material used to manufacture goods for export purpose.

The CBEC had to come out with clarification following a confusion whether duty benefits given to exports should be extended to supplies going to SEZs.

The clarification was given because a view was put forth that rebate under Rule 18 is admissible only when the goods are exported out of the country and not when supplies are made to an SEZ.

The department had received representations from its various field formations and various units on the issue of admissibility of rebate.

To boost exports, the government provides several sops like refund of duty on imported raw material and concessional finance.

Formal approval has been accorded to 575 SEZ proposals, of which 348 have been approved. A total of 105 have commenced exports.

Under the SEZ Act, units in these zones are given 100% tax exemption on their income for the first five years and 50% in the next five years.