India mulls SEZ Act change to let units sell locally at lower taxes amid US tariff hit

The key fiscal benefit of the proposed amendment is to allow SEZ units to sell their goods in the domestic tariff area (DTA) on a 'duty foregone basis'

- AMITAV RANJAN

In a step to offset the trade damages due to the US tariff, India has exhumed a shelved proposal to amend the Special Economic Zones (SEZ) Act that would allow units within SEZs to sell their goods in the domestic markets at lesser taxes.

The key fiscal benefit of the proposed amendment is to allow SEZ units to sell their goods in the domestic tariff area (DTA) on a 'duty foregone basis' where the seller units would have to pay Goods and Services Tax equivalent to the duty relief they availed while importing the inputs for the goods sold in the DTA.

"Resultant goods manufactured or processed in a Unit using imported inputs when removed to the DTA shall be chargeable to: i) duty of customs equal to the exemption availed on inputs under Section 26 of the Act; and ii) duty of customs equal to the amount of drawback if any, claimed under Section 75 of the Customs Act, 1962 and other benefit if any, availed under the Foreign Trade Policy on the goods used as inputs in such resultant goods," says the proposal.