Dept of Commerce issued important operational issues pertaining to Special Economic Zones (SEZs)/Export Oriented Units (EOUs)

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Reply from DGEP

Issues requiring immediate action

1.

No specific instances of such non-sanctioning of ITC refunds have been provided against supplies made to SEZ developers and units. DGEP has requested to provide a list of such ITC refunds not sanctioned beyond 6 months of filing them with details like name of DTA supplier, GSTIN, invoice details, etc. so that concerned field formations can be flagged for necessary actions. However, CBIC has been issuing clarificatory circulars on refund related issues from time to time with circular no. 135/05/2020-GST dated 31.03.2020 being the latest one. CBIC recently has begun a countrywide special drive to expedite Customs and GST refunds ending as of 7th April 2020. These measures taken by CBIC may be informed to officers for further dissemination to various stakeholders in this regard,

2.

Extension of timelines fixed for e- ay bills in view of the extra time being taken for obtaining permission from designated nodal authorities and in view of the restrictions imposed on the movement of goods due to lockdown.

The request to extend timelines fixed for e-way bills has already been taken care of by CBIC with the issuance of notification no. 35/2020-Central dated 03.04.2020, wherein if the validity of n e-way bill generated under Rule 138 of the GST Rules expires during the period 20.03.2020 to 15.04.2020, the validity period of such e-way bill has been extended till the 30.04.2020.

3.

CBIC has taken various measures like 24×7 customs functioning, single-window helpdesk on the CBIC website, Customs Zones/formations wise appointment of nodal officers with name, designation, office, and e-mail address and contact details for facilitating Customs clearance amidst the OVID-19 crisis, waiver of late fee for delays in filing Bills of Entry[notification no. 27/2017ustoms (N.T.) dated 31.03.2017 read with the second proviso to section 46(3) of the Customs Act], temporarily dispensing with the submission of bonds, wherever required [circular no. 17/2020-Customs dated 03.04.2020, etc. Zonal Customs formations re also issuing Public Notices from time to time in order to address various import/export-related issues relating to COVID- 19 lockdown problems. these measures have been specially undertaken to facilitate Customs clearance/release of exports/imports shipments from ports, which are held up due to COVID- 19 lockdown. Specific instances of such export/import shipment issues not yet resolved may be informed to the nodal officer of that Customs Zone/Formation for its redressal.

General Policy Issues

4.

Proposal for reducing/ eliminating GST imposed on foreign currency conversion charges has been flagged to JS (TRU-I) for examination.

5.

As an export promotion measure, OUS may also be granted ab-initio exemption from payment of GST.

GST law has been premised on the principle of paying first and then claiming refund for the simple reason as to maintain the GST credit chain with its verifiable audit trail and to avoid any fraudulent claims. However, for EOUs, a number of measures as already been taken to simplify the processes. he imports by EOUs have been exempted from payment of IGST till 31.03 .2021 vide notification 0. 16/2020-Customs dated 24.03.2020. For domestic procurements, such supplies have been declared as deemed export supplies under section 147 of CGST Act and either supplier or receiver an claim the refund of GST paid, vide notification no. 47 & 48/2017-Central Tax, both dated 18.10.2017. The claim of refund of accumulated ITC (Input Tax Credit) has been made completely online w.e.f. 26.09.2019 and such refunds under all tax heads (whether CGST, SGST, GST or Compensation Cess) have been enabled to e sanctioned and disbursed by a common single authority (either Centre or State) as clarified vide circular no. 125/44/2019 dated 18.11.2019. As the process of refund is quite hassle-free, online and quick, hence there appears no requirement o anting ab-initio exemption from payment of GST n domestic procurement by EOUs.

6.

As an alternative to the refunds o GST, Income Tax etc. pending disbursal from Government, commercial banks may be directed to advance loans with interest being paid by Government for such funds of GST, taxes, etc pending.

No basis/framework has been provided for this proposal of Government paying the interest against loan advanced by Banks in lieu of refunds of GST, Income Tax etc. A concept paper may be provided in this regard for examination by CBIC.

7.

There is a need for elimination of physical submission of documents or custom clearances.

There seems to be no requirement for submitting physical documents to concerned Customs officer at the port of import/ export by units/ developers in SEZ or their representatives at the time of import/ export of goods due to integration of Customs EDI ICES) with SEZ Online system. The hitherto annual procedure of endorsing/ validation actions by officers both at the end of SEZ and customs port in workflow involving import/ export has been automated by this integration hereby dispensing with the requirement o submitting various documents at the port of import/ export. Customs formations have issued Public notices in this regard. Specific instances may be provided so that concerned field formations can be tagged on this issue.

8.

Eliminate requirement of obtaining transshipment permission for movement of import cargo from ort area of SEZ units in case of ort based SEZs like Mundra.

Transshipment procedure for the movement of goods from gateway port to SEZ is provided under SEZ rules. As per this, fifth copy of the registered or assessed Bill of Entry filed by an importer in SEZ I will be submitted to Customs officer at the port of import, and is itself treated as permission for transfer of goods to SEZ. No separate documents or transshipment bond is required to be filed, and the transshipment permission is stamped on the fifth copy of the Bill of Entry. Therefore, the transshipment procedure for movement of cargo wants for SEZs is already much simplified under EZ law. Hence, there seems to be no requirement f doing away with transshipment permission for movement of import cargo from the port area of SEZ nits in case of port-based SEZs like Mundra for its uniformity across all SEZs.

9.

Non-disbursement of Duty drawback to goods supplied from TA to FTWZ: As per Rule 24(2) f SEZ Rules, 2006, a DTA supplier ho supplies goods to FTWZ is eligible for claiming Duty drawback from their jurisdictional ST Commissioner or Central excise Commissioners. However, rule 24(3) states that Duty drawback shall be admissible subject to the payments for the supply are made from the Foreign currency Account of the Unit. As per Rule 18(5), a transaction between DTA Supplier and the foreign Supplier is permitted, however, in this export transaction e payment is not routed through the Unit’s account. Hence, there is a lack of provision/clarity for grant of duty Drawback in such an export section.

In the context of FTWZ, the requirement of making payment from forex account of the unit in FTWZ to are DTA supplier seems to be not feasible as unlike in SEZ, goods in FTWZ are held on behalf of the foreign supplier and therefore, payment for such goods are made directly in forex to the DTA entity y such foreign supplier and not by the FTWZ unit. a separate proposal in this regard may be sent for examination by CBIC.

10.

Permission to File a consolidated Bill of Entry in case of E-Commerce om FTWZ.

The proposal to permit filing consolidated Bill of entry by a unit in FTWZ against goods imported by domestic consumers through the E-Commerce platform is under examination. Further inputs in this regard have been received from stakeholders which are under active examination.

11.

Request for exemption of GST on services rendered and consumed within FTWZ: Units in FTWZ are allowed to hold goods on account/behalf of foreign entities in accordance with Special Economic zones Act, Rules & Instructions. such foreign entities do not have presence in India. Indian FTWZs are competing with the Global Free ones located in Singapore, Dubai, and China, etc. As per international practices, taxes are not levied on services rendered to such foreign entities in those zones, thereby maintaining the spirit of avoiding export of taxes from such countries. Whereas in India, GST @18% levied on services rendered and consumed inside FTWZ, thereby exporting taxes.

FTWZ units primarily provide warehousing services and other allied services like labeling, packing, repacking etc. to their foreign supplier in FTWZ. Here, the goods are owned by the foreign supplier and the unit in FTWZ only holds such good on behalf of such foreign supplier. As the recipient of service i.e. the foreign supplier is not registered in India, as per IGST Act, the place of supply of services, in this case, shall be the place where these services are performed, i.e. the FTWZ itself. Therefore, even if the recipient of services is the foreign supplier located abroad, such services re not considered as export of services under the ST law, and therefore, are rightly taxable @18% ST. However, it was being informed by your office that as per international practices, taxes are not levied on such services rendered to foreign is clients in FIWZ located in Dubai, Singapore, China, etc. If that be the case, further inputs are provided on this as far as an international practice are concerned so that it can be further examined by CBIC.

12.

Due to loss of business, diamonds purchased from DTA from Jan 2020 ay be permitted to be returned to TA without duty as there is no venue loss in such transactions.

Section 30 of the SEZ Act provides for charging duties of customs on supply of any goods from SEZ o DTA. Therefore, diamonds purchased from DTA y units in SEZ, if supplied as such back to the DTA supplier, customs duty shall be chargeable as if such goods are imported into India. SEZ law does not extend any exclusion from payment of customs duty on as such clearance from SEZ to DTA. Therefore, the request can’t be considered under the provisions of the extant SEZ law.