GST Impact: Government to Modify the Provisions of SEZ Act

Madras HC- sez - Development Commissioner - Taxscan

As the Government is all set to introduce Goods and Services Tax (GST) by the next financial year, certain amendments will be made in the provisions of the Special economic Zones (SEZ) Act in consistent with the GST Act.

Reportedly, Revenue secretary Hasmukh Adhia chaired a meeting, attended by commerce secretary Rita Teaotia and others, on November 9 to take stock of changes required in the SEZ Act so that such zones, which are already reeling under direct taxes like MAT and DDT, are not subject to undue hassles at least in the new indirect tax regime.

Section 26 and 30 of the Act will be amended in order to ensure certain duty exemptions to the designated enclaves in the new tax regime.

According to sources, Section 26 C, E and G of the SEZ Act will be modified. Section 26C deals with exemption from any excise duty on goods brought from the domestic market to an SEZ to carry out authorised operations by the developer.

Similarly, Section 26 E provides for exemption from the service tax on relevant sevices provided to an SEZ developer. Section 26 G offers tax exemption to SEZ developers from the sale or purchase of goods other than newspapers (under the central sales tax Act, 1956).

The government had imposed the minimum alternate tax (MAT) on SEZ developers and units and the dividend distribution tax (DDT) on developers in 2011-12. Before the MAT and the DDT were imposed, the growth in exports from SEZs was as high as 121% (2009-10) and 43% (2010-11), far exceeding the increase in the country’s overall goods exports for these years.