Soon after finance minister Pranab Mukherjee announced a 16% customs duty on power sold by producers in special economic zones (SEZs) to outside customers, the government has initiated steps to recover dues from producers like Reliance Jamnagar Infrastructure.
The revenue department has asked the commerce ministry?the agency that collects taxes from SEZ units?to recover dues from these power producers since June 2009. According to the finance ministry?s estimate, since then, Reliance Jamnagar Infrastructure Ltd has benefited by close to Rs 50 crore in cost savings as SEZ producers enjoy tax exemptions that outside producers do not get. While power projects within SEZs are allowed duty-free imports irrespective of their capacity, only mega power projects get this benefit outside SEZs. SEZ units are also exempt from all taxes including customs, excise, service and income taxes.?
The customs duty is levied on the sale price of power to non-SEZ customers. Officials are in the process of assessing the cost advantage of Adani Power and Essar that have power generation capacity more than required for captive consumption. Adani group?s Mundra SEZ and Essar?s Hazira SEZ produce power. The commerce ministry last week said SEZ power producers are deemed to have licence to distribute power to outside customers.
Besides ensuring level playing field between power producers in and outside SEZs, budget 2010-11 also applied a favourable income tax provision retrospectively for businesses that have production facilities in SEZs as well as outside. Prior to? Finance Act 2009, the more units an entrepreneur has outside SEZ units, the lesser the tax-free profits that he gets from?SEZ units.