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More sops for domestic area suppliers likely

Hema Ramakrishnan

NEW DELHI, March 19

THE Finance Ministry is set to extend more sops, including tax breaks to suppliers sending goods from the domestic tariff area (DTA) to the special economic zone (SEZ) in the forthcoming Exim Policy.

According to official sources, the Finance Ministry has agreed, in principle, to give suppliers from the DTA to the SEZ the option to claim duty entitlement pass book (DEPB) credit in lieu of deemed export benefits.

Currently, DEPB credit is available only on physical exports and not on deemed exports. The Commerce Ministry had, even last year, made out a case for extending DEPB credit to DTA suppliers as an export promotion measure.

This was, however, turned down by the Finance Ministry in view of the revenue implications.

The annual outgo on a plethora of export incentive schemes works out to around Rs 20,000 crore.

The Finance Ministry has, however, finally conceded to the demand to treat supplies from DTA to the SEZ as physical exports, thereby entitling such sales to benefits of tax concessions under Section 80HHC of the Income-Tax Act 1961. A formal announcement is likely to be made in the Exim Policy, the sources said.

The recommendation to accord DEPB credit to DTA suppliers is also linked to one of the most important proposals in the Exim Policy pertaining to a change in the very definition of `export'.

Under the existing Foreign Trade (Development and Regulation Act) 1992, export is defined as "taking out of India any goods by land, sea or air''. The Commerce Ministry has proposed that DTA supplies to SEZs should also be included in the definition of export.

The Finance Ministry has been asked to consider amendments in the Customs Act 1962 to align it with the proposed changes in FTDR Act.

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