The government is likely to bring in an ordinance by next week to amend the SEZ Act to bring it in line with the Goods and Services Tax (GST), due on July 1. The commerce ministry is working on the same, a source said. Certain provisions in the special economic zone (SEZ) Act, 2005, are not consistent with the GST regime and need to be made compatible before the July 1 rollout date. For instance, the duty drawback norms, under which an exporter is compensated for duties during the course of production of goods, are required to be in sync with the new indirect tax structure.
Under the current rules, units in an SEZ get service tax exemption and the developers are exempted from Customs or excise duty for development of zones for authorised operations. Additionally, the Section 26 of the SEZ Act dealing in exemptions, drawbacks and concessions to developers and entrepreneurs has to be amended.
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SEZs are export hubs that contribute about 16 per cent to the country’s total out-bound shipments. GST unifies 16 different levies like excise, service tax, and VAT, among others.