Sale to Domestic Tariff Area by SEZ - At Glance.

[KS Ramaswamy]

The purpose and object of the government to establish Special Economic Zone (SEZ) in the country  is for promotion of exports. Thus, the object of special Economic Zone to make available goods and services to the entrepreneur at free taxes and duties for country 's exports and as a result there will be surplus convertible foreign exchange for the purpose of balance of trade.

Section 2 (i) of The Special Economic Zone Act,  2005 specify that Domestic Tariff Area includes whole of India including its territorial waters and continental zones, excluding SEZ.

section 30 of the Act contemplates that any goods produced by SEZ can be removed from SEZ subject to the conditions prescribed in the SEZ Rules made from time to time. Further the Act is also explicit that any goods removed  from SEZ  to Domestic Tariff Area, an appropriate duties of Customs including anti dumping duty,Countervailing Duty (CVD) and safe gurd duties as applicable to be paid. The rate of duty and tariff valuation for the goods removed from SEZ  will the rate of duty and tariff value as in force on the date of clearance from SEZ and in case if the date is not ascertainable, on the date of payment of duty.  

Rule 47 of SEZ Rules, 2006, specifies that the unit may sell goods and services including rejects,wastes or scraps, remanent or broken diamond etc or any goods arising on account of manufacturing process or in connection with to Domestic Tariff Area imposing certain conditions viz:

i.Submission of import licence  as applies to import of similar goods into India prescribed under Foreign Trade Policy,

ii. If the goods procured by the unit  from DTA or imported, and it if the goods are sold as such without being processed or utilized will be dealt in according with Foreign Trade policy as if the similar goods imported into India.

iii. The scrap or dust of gold, platinum  or silver may be sent to government mint or private mint from the unit and return as bars in accordance with customs procedures or otherwise the scraps  may be sold in DTA on payment of duty on such gold, silver, platinum.

iv. Power generated in the units power plant may be transferd  to DTA on payment of duty on the raw material and consumable used for generation of such power, but for this the rule prescribes few condition  viz:

I. The development commissioner after receiving the proposal for sale must consult the State Electricity Board,  and if the sales is within SEZ no such consultation is essential.

II The norms for generation of power will be approved by the Committee.

III Sale of surplus power to DTA, the unit must first obtain permission from the Officer and from State authority as well.

IV The duty pertain to sale of surplus power will lie as per the SEZ  Rule, and in respect of valuation and assessment will be dealt in accordance with Customs Act.
Section 48 of the Act  prescribes the procedures to be followed by DTA buyer, where the buyer need to file a bill of entry for home consumption, the valuation of the goods or service will be in accordance with Customs Act. The capital goods after use in the units may be removed on payment of appropriate duty on such capital goods on the depreciated value at rate of duty in force. The depreciated value will be calculated on straight value method as envisaged under section 49 of the SEZ Act. The goods supplied by the unit to DTA on payment of duty may be brought back for test repair etc within 6 months from its removal subject to identity of such good.

IGST levy on sale by SEZ to DTA is contemplated under section 7 4 (b).

Thus it can be conculded that the above is the procedures and norms to be followed when there is a removal from SEZ to DTA. This articles is only at glanze.

 

Discussions to this article

[SHARAD ANADA]

Sir,

One query regarding SEZ translation

DTA unit received export order from foreign customer.

DTA unit purchase goods from SEZ and from SEZ unit itself goods are by exported by DTA to customer outside India.

What will be GST impect on transaction of sez supply to DTA and what are the formalities to be followed in such transaction.

Pl guide

[RAMASWAMY Advocate]

Sir,

For Removal of goods from SEZ procedures contemplated under section 48 of SEZ Act has to be followed. The IGST u/s 7( 5) (b) of IGST Act, 2017 to be followed. Any removal from SEZ to DTA deemed to be an import in our opinion.