SEZ units may get I-GST waiver for DTA supplies

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Published: April 15, 2020 2:45 AM

Additionally, the revenue department is also considering treating a section of MSMEs under the GST scheme for composition dealers, so that they are taxed at concessional rates till the Covid-19 crisis blows away.

Supplies from SEZ to DTA are considered to be imports and are levied with integrated GST (IGST), which is in addition to basic customs duty.Supplies from SEZ to DTA are considered to be imports and are levied with integrated GST (IGST), which is in addition to basic customs duty.

The government is considering tax sops to encourage special economic zone (SEZ) units for making supplies to the domestic tariff area (DTA), a finance ministry official said. Additionally, the revenue department is also considering treating a section of MSMEs under the GST scheme for composition dealers, so that they are taxed at concessional rates till the Covid-19 crisis blows away.

Government officials told FE that SEZ units, primarily from the pharmaceutical industry, proposed to the government that they could undertake domestic supplies if a minimal or nil tariff regime is accorded to them as a temporary measure. Supplies from SEZ to DTA are considered to be imports and are levied with integrated GST (IGST), which is in addition to basic customs duty.

While the government is inclined to approve such a regime, it wants to restrict it to within a small timeframe and also only to the pharmaceutical sector without making it a free-for-all. A decision would also have to consider the implication on businesses running in DTA which would be severely disadvantaged in competing with SEZ units, sources said.

While the government has extended date deadline for filing monthly GST returns for March, April and May to the last week of June, it’s also considering extending composition tax rate to a wider section of the small businesses during the crisis period.

Composition scheme is available to firms with less than Rs 1.5-lakh turnover and engaged in manufacturing, trading or running non-alcoholic restaurants. They are offered a simple, compliance-friendly regime with tax payment of only 1% of turnover for manufacturers/traders and 5% for restaurants. It is also available to service providers with a Rs 50-lakh annual turnover but they are taxed at 6% of annual turnover.

Many businesses which otherwise qualify for the scheme may not opt for it as they can’t claim input tax credit (ITC). Further, it also restricts those making inter-state supplies. So far, out of 1.22 crore GST taxpayers, only about 18 lakh are under this scheme.

An official said that many other small businesses could be taxed at composition scheme-rates for at least next three months. These firms are likely to be hit worse than their bigger counterparts, and the relief in tax rates could give them breathing space, he said.

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