Exporters in SEZs need to be incentivized: TPCI

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Addressing a recent webinar on SEZs organized by TPCI, Mr Mohit Singla, founder Chairman TPCI called for bold measures to revive investment, promote manufacturing and exports from India, and boost job creation. And in order to achieve this he said that TPCI(Trade Promotion council of India) is proposing announcing a simple policy reform which is also WTO compliant.

Highlighting an area within the SEZ policy that needs to be addressed, Mr Singla stated ‘At present, an exporter in an SEZ and a foreign exporter are at par when it comes to selling goods to a domestic tariff area (DTA)’. Thereby stating that there is no benefit between running a company in DTA or running a company within a SEZ.

Therefore, an exporter within the SEZ should be incentivized on the degree of value addition he brings to a product. He should be allowed to import raw material at zero duty and avail duty rebate proportionate to value addition. This will keep him at an advantageous position as opposed to importing finished products from another country. Also it will lead to automatic cauterization as the incentive will act as a pull factor.”

Mr. Sunil Rallan, Chairman and Managing Director, Chennai Free Trade Zone said, “Manufacturing units find themselves in India setting up discrete factories for DTA and exports in order to comply with the duty exemptions claims and the tax refund mechanisms. SEZs have the potential of becoming very attractive for these relocating units, if only we could enable them to seamlessly supply both to the DTA and the global markets.”

“At present, an exporter in an SEZ and a foreign exporter are at par when it comes to selling goods to a domestic tariff area (DTA)” — TPCI

Rallan proposed, “The Manufacture and Other Operations Regulations, 2019 (MOOWR scheme), provides upfront remissions of duties and taxes and is de-linked from an export obligation. Products you know, which we have seen which are manufactured in the SEZ unit and supplied to DTA are subject to tariffs on the entire value of the finished product, including the local value addition. There have been several instances, where products were imported from ASEAN region countries with whom we have a FTA at much lower tariffs than what is supplied from the SEZ units.” Therefore, SEZ units must be charged with tariff only on the duty for one principle as is the practice in the MOOWR scheme, he added.

Prof. Parthapratim Pal, IIM Calcutta said, “India has a window of opportunity due to the planned relocations of manufacturing happening, and Special Economic Zones can definitely play a very important role.

Speaking on the sale to the domestic tariff area he opined why doesn’t the government make the SEZs pay the minimum possible tariff that is applicable across all FTAs. Just make the FTAs pay a duty to make them at par, at a same platform with the other domestic manufacturers but pick out the least possible FTA duty for each product and make those applicable for the FTAs, who are selling in the domestic tariff area, he added.

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