This Tax Alert summarizes a Notification1 issued by Central Board of Indirect Taxes and Customs (CBIC) notifying concessional rates of basic customs duty (BCD) and Agriculture Infrastructure and Development Cess (AIDC) on specified goods manufactured by a unit in Special Economic Zone (SEZ) and cleared into Domestic Tariff Area (DTA).
The key observations of the HC are:
§
The
Notification is effective between 1 April 2026 and 31 March 2027.
§
Benefit
under the Notification shall be available only to the SEZ units which had
commenced production on or before 31 March 2025 and shall not be available to
Free Trade Warehousing Zone (FTWZ) or on goods which after importation in the
SEZ are removed, as such or after use, to the DTA.
§
Goods
cleared into DTA under the Notification should have undergone a minimum value
addition of 20%.
§
The
aggregate value of such goods in a financial year shall not exceed 30% of the
highest annual Free-on-Board (FOB) value of exports in any one of the three
immediately preceding financial years.
§
No
duty drawback or other export benefit under the Foreign Trade Policy should
have been availed by either the SEZ unit or the supplier in respect of inputs
used in such goods.
Comments:
a.
The
measure is expected to benefit SEZ units by enabling them to clear accumulated
inventory into the Domestic Tariff Area (DTA), which could not be exported due
to global trade disruptions.
b.
In
general practice, bill of entry for home consumption is filed by DTA entity at
the time of clearance of goods, and the SEZ unit does not independently
discharge GST on such supplies.
c.
However,
under the present notification, since the bill of entry is required to be filed
by the SEZ unit, the possibility of a dual levy of IGST may have to be examined
i.e., first at the time of filing the bill of entry for home consumption and
again by treating the transaction as a supply under the GST framework.
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