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Ministry clears sops package for SEZ units

Our Bureau

NEW DELHI, March 29

THE Finance Ministry has given its consent to extending a host of sops to special economic zones (SEZs) including service tax exemption and income-tax breaks. Any service rendered within the zone or to the developer will be exempt from the impost.

The Department of Economic Affairs (DEA) has also cleared the proposal to permit the setting up of offshore banking units in SEZs as part of the Exim Policy package. In effect, Indian banks can open branches in the SEZs and these will be licensed by the Reserve Bank of India as overseas branches of the banks.

A special dispensation for capital goods imports for mega projects (of Rs 100 crore or more) under the export promotion capital goods (EPCG) scheme has also been approved. Official sources said that the Finance Ministry had given its go-ahead to the proposal to allow an export obligation (EO) period of 12 years to capital goods import under the EPCG scheme for mega projects. Exporters will pay the nominal five per cent customs duty. The Revenue Department has also decided to extend the tenure on duty concessions accorded to the import of embellishments for leather and textile garments beyond this fiscal. The benefit will also be extended to the handicrafts sector.

All the existing export promotion schemes will continue, as the Commerce Ministry is not in favour of their rationalisation in the near term.

Although the revenue outgo from all the schemes has been estimated at over Rs 18,000 crore during April- December period last year, the Finance Ministry is not harping on revenue implications this time around since the extra outgo on account of extending more sops is not very significant.

The package for SEZs, cleared by the Finance Ministry, includes tax breaks to suppliers sending goods from the domestic tariff area (DTA) to SEZs.

All transactions between the DTA and the SEZ will be treated as import and export under the Foreign Trade Development and Regulation Act, Customs Act, Income-Tax Act and Central Sales Tax Act. This will mean that the suppliers from the DTA to the SEZ will have the option to claim Duty Entitlement Pass Book (DEPB) credit in lieu of deemed export benefits.

The Commerce Ministry had asked the Finance Ministry to reconsider the Budget proposal to restrict tax exemption under Section 10 A and 10 B to 90 per cent of the profits earned by such units. The Ministry's demand would be taken up while finalising the official amendments to the Finance Bill 2002 and changes, if any, would be reflected in the amendments, said official sources.

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