Indirect Tax Benefits on Supplies to SEZ- Contractors Perspective- Final

8/12/2019 Indirect Tax Benefits on Supplies to SEZ- Contractors Perspective- Final

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All rights reserved | 1Indirect tax benefits on supplies to SEZ Contractors perspective

T a x a n d R e g u l a t o r y


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Insert picture from stock here

CONTENTS

The scheme providing benefits

Can the rules go beyond the Act

CST on procurement & sale

Excise duty at OEM level

Service tax on procurement & sale

Import procedure

Sales tax exemption (select States) general comments


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THE SCHEMEPROVIDING BENEFITS


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A typical supply chain under EPC contracts

EPC typically involves a Main Contractor, and Subcontractors/vendors who undertake

material supply and/or provision of services to the Owner/Main Contractor

(respectively) while executing the project

Diagrammatically, this could be depicted as under:

Subcontractor

Subcontractor

Subcontractor

ContractorProject

owner/SEZUnit/Developer

Services/materialProjectdeliverables

In the above structure, the levy of indirect taxes (viz. service tax, sales tax/VAT,

excise duty etc.) typically arise on the Contractor as well as the Subcontractors

In the subsequent slides, the provisions of the SEZ Act conferring benefit of these

taxes in the overall supply chain, has been examined


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The Scheme providing benefits

Under Section 26, every Developer and Unit is entitled to the following

exemptions, drawback and concessions, namely Exemption from customs duty on goods imported into the SEZ

Exemption from any duty of excise on goods brought from the DTA to the SEZ

Exemption from service tax on taxable services provided to the SEZ

Exemption from tax on sale/purchase of goods under the CST Act, etc

The provision relevant only on procurements by Unit & Developer & and noton sales/output services

Consequently, a Contractor is eligible for the following benefits

If the Contractor is a OEM, it is exempt from Excise duty

If the Contractor is a seller, it is exempt from CST on its output sale

If the Contractor is a service provider, it is exempt from its output Service tax


7/56All rights reserved | 7Indirect tax benefits on supplies to SEZ Contractors perspective

The controversy in the Scheme

IInd Proviso to Rule 10 of the SEZ rules provides as follows

Provided further that exemptions, drawbacks and concessions on thegoods and services allowed to a Developer or Co- Developer as the casemay be shall also be available to the contractors appointed by suchDeveloper or Co- Developer and all the documents in such cases shall bearthe name of the Developer or Co Developer along with the contractor and

these shall be filed jointly in the name of the Developer or Co-Developerand the contractor

In addition, Provision to Rule 27(1) of the SEZ rules provides as follows

exemptions from payment of duty, taxes or cess, drawbacks and

concessions on all types of goods and services, required for setting up andmaintenance of the factory building, allowed to a Unit shall also beavailable to the contractors appointed by such Unit and all the documentsin such cases shall bear the name of the Unit along with the contractor andthese shall be filed jointly in the name of the Unit and the contractor



The Controversy in the Scheme

These two Rules, would imply that the benefits accorded to a Contractor on

its Revenue side (ie on supplies made to the SEZ) would be available to theSubcontractors of such Contactors as well

If the above principle were to hold good, it would essentially mean Exemptions from any duty of excise on goods manufactured by an OEM, who is

a Subcontractor to the Main Contractor appointed by the SEZ Unit/Developer

Exemption from service tax on taxable services provided by a Subcontractor ofthe Main Contractor appointed by the SEZ Unit/Developer

Exemption from tax on sale/purchase of goods under the CST Act on saleseffected by the Subcontractor to the Main Contractor appointed by the SEZUnit/Developer



The Controversy in the Scheme

The conclusion (in the preceding slide) would essentially suggest that, via

the Rule, exemptions are being provided to a Subcontractor, even thoughthe Act does not envisage such a scheme

Therefore, the moot question is Can the Rules travel beyond the Act

If they cannot, then the benefits envisaged under the Rules on the outputtaxes of the Subcontractor would not be available

The finer point Can the Rules travel beyond the Act, has been

examined in the following slides


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Can the Rules travelbeyond the Act


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Can the Rules travel beyond the Act

It is an established principle that the Rules cannot travel beyond the Act

Some of the judicial decisions endorsing this view have been enumeratedbelow: The basis of the statutory power conferred by the Statute cannot be transgressed

by the rule making authority. The rule making authority has no plenary power. Ithas to act within the limits of the power granted to it (Bimal Chandra Banerjee v.State of Madhya Pradesh AIR 1971 SC 517)

The Rules, therefore, cannot be so framed which do not carry out the purpose ofthe chapterand cannot be in conflict with the same (Laghu Udyog Bharti v. UOI 2006 (2) STR 276 SC)

Delegated legislation must be read in the context of the primary/legislative Actand not the vice-versa - In case of a conflictbetween a substantive provision ofan Act and delegated legislation, the former shall prevail (ITW Signode India Ltd.v. Collector of central excise 2003 (158) E.L.T. 403 (S.C.)


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Can the Rules travel beyond the Act

Accordingly, Rule 10 & Rule 27, cannot travel beyond the SEZ Act, in as

much as It cannot grant benefit beyond that which has been contemplated under the SEZ

Act

Thus, it appears that Rule 10 / Rule 27 are ultra vires the SEZ Act and hence notvalid

Consequently, as the SEZ Act contemplates benefits only on the Revenue Side

of the Main Contractor, the Rules cannot extend the benefit of tax exemptions onthe cost side of the Main Contractor

In short, Subcontractors would not be eligible to any output tax exemptions,similar to that which is available to the Main contactors on their output taxes

There however exist few thoughts to reflect upon


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Thoughts for reflection !

Who would challenge the validity of Rule 10 / Rule 27 ?

Would the Government not be bound by Rules framed by it ?

Can the non-SEZ competitors challenge these Rules on the basis that theseRules provide benefits not envisaged under the SEZ Act ?

Would not the Rules be void ab initio ?

Therefore, in the subsequent slides benefits on supplies to SEZ have been

examined under the two scenarios:

Where Rules 10 and 27 are valid ; and

Where the above Rules are not valid


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CST ONPROCUREMENT ANDSALES WHERE

RULES 10 & 27 AREVALID


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Availability of exemptions to supplies of Main Contractor

Interstate sales effected by the Main Contractor to the SEZ Unit/Developer

would be entitled to exemption from CST against Form I

This exemption has a limited impact, at least where supplies are being made

to a Unit/Developer who can issue Form C, if the Main Contractor adopts

In-transit Sales/ E1 sales/ 6 (2) Sales


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Availability of exemptions to supplies of Subcontractor of a MainContractor

On application of Rules 10 & 27, CST on sales effected by the

Subcontractor would also be exempt from CST (in theory)

However, there exist the following practical difficulties: The exemption from CST under the SEZ Rules, contemplates issuance of Form I

by the purchaser as per the CST Act & Rules

As per the CST Act and the Rules, Form I can be issued only by a Unit or aDeveloper in the SEZ

Accordingly, there is no provision that permits a Main Contractor to issue a FormI, such that its Subcontractor can also claim the CST exemption as contemplatedin the SEZ Rules


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CST ONPROCUREMENT ANDSALES WHERE

RULES 10 & 27 ARENOT VALID


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Availability of exemptions to Main Contractor & Subcontractor

There would be no change with regard to the exemption available to the

Main Contractor in this scenarioHowever, where the Subcontractor is not eligible to claim the above

benefits, the key question that arises for consideration would be as follows: If supplies by Main Contractor to SEZ amounts to export, can the sales made by

the Subcontractors qualify as preceding salesin the course of export andremain outside the net of CST/VAT

This issue assumes importance since under the SEZ Act: Export, has been defined to mean supplying goods from DTA to a Unit or

Developer; and

SEZ has been deemed to be a territory outside the customs territory of India forthe purposes of undertaking authorized operations

This issue has been examined in the following slides


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Can supplies to SEZ be eligible for export benefits

Prima-facie, relying entirely on the meaning ascribed to the term Export and

crossing the customs frontier(under the SEZ Act), it would appear that: Supply of goods by the Main Contractor to the SEZ being export and the

Constitution of India prohibiting levy of tax on export, there would never be anyoccasion for levy of tax

That being the case, there would be no requirement for furnishing Form I as well

Therefore, should the same principle not apply to preceding sales in the course

of export, as they are one integrated transaction dovetailed into a singletransaction, thereby enabling the Subcontractor to also avail the exemption ?


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Can supplies to SEZ be eligible for export benefits

The preceding conclusions should not be made unless the following points

are considered: The Constitution lays down (in Article 286) that no law of a State shall authorize

the imposition of a tax on sale in the course of exportand the Parliament wouldmake law formulating principles for determining when a sale takes place in thecourse of export

Pursuant to this Article, the CST Act has formulated principles for determining

when a sale takes place in the course of export Therefore, to take protection of the above Constitutional restriction, reliance has

to be placed only on the interpretation of the phrase sale in the course ofexport(accorded by the Judiciary) as well as any other legislation whichprovides appropriate principle on the matter, including the CST Act

Therefore, the interpretation accorded by the Judiciary to the term sale inthe course of exportwith reference to the above Constitutional provision,needs further examination


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Interpretation of Sales in the course of export

There must be a sale

Goods must actually be exported

Sale must be a part and parcel of the export

Case laws Ratio

The word export" did not mean merely "taking out of the country" butthat the goods must be sent to a destination at which they could besaid to be imported

Concept of export in article 286(1)(b) of the Constitution postulates the

existence of two termini between which they are intended to betransported,

Not a mere movement of goods out of the country without anyintention of their being landed in specie in some foreign port

State of Kerala v.

Cochin CoalCompany Ltd. 12 STC1

State of Kerala v.Cochin CoalCompany Ltd. 12 STC1

Narang Hotels 135STC 289 (Bom)


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It is also instructive to notice that in Empresa Siderurgica, S.A. v. Merced 337 US 154

it was held that

"It is the entrance of the articles into the export stream that marks the start of

the process of exportation. Then there is certainty that the goods are headed for

their foreign destination and will not be diverted to domestic use. Nothing less

will suffice."

When does export commence

The Bombay High Court in Narang Hotels case held that

in case of import the expression "before the goods have crossed the customs

frontiers of India" means the goods must have crossed the limits of area of

customs station, namely, customs port. In other words, the goods must move or

undertake onward journey to a foreign destination and cross entire customs

station including its outer boundary


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Therefore, two key points emerge from the judicial decisions

Export contemplates a foreign territory where the goods must be imported into

Goods must cross outer boundaries of customs station for export to commence

In this context the following observations would be crucial to take note of:

Definition of DTA under the SEZ Act - whole of India (including territorial waters

and continental shelf) but does not include the areas of SEZ

In case an SEZ is notified as a customs station/any place where goods are

ordinarily kept before clearance by customs authorities then for the Export to

commence the goods have to cross the outer boundary of such SEZ on

outbound journey

Tacit recognition of the fact that SEZ are not areas outside India, since Indian

labour laws and other laws find applicability within the SEZ

Accordingly, it appears that supplies to SEZ cannot be considered as

exports as interpreted by the Judiciary and as understood in the context of

the CST Act since none of the tests appear to be met


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The Conflict between the general principles & the SEZ Act in thepresent context

Notwithstanding the conclusion in the preceding slide, it may be noted that

Section 51 of the SEZ Act provides the following:

The provisions of this Act shall have effect notwithstanding anything inconsistent

therewith contained in any other law for the time being in force or in any

instrument having effect by virtue of any law other than this Act

Basis the above, can the following be argued ?

That since the SEZ Act overrides all other law, therefore it ought to override

judge made law (under Article 141) as well as the CST Act

If yes, should not the supplies from the DTA to the SEZ be eligible for the

protection against tax as envisaged in Article 286 (ie not liable to any tax)

Consequently, cant the same principle be also applied on the preceding

sale/purchase (from Subcontractor to the Main Contractor)


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EXCISE DUTY AT OEMLEVEL


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Availability of exemptions to supplies of Main Contractor (OEM)

Supplies by manufacturers who are Main Contractors to the Unit/Developer

would not be liable to excise duty

To avail this benefit, the Main Contactor must supply the goods directly to

the SEZ Unit/Developer

In addition the procedure indicated in the subsequent slide must be followed

by the Main Contractor (who is an OEM)


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DTA Supplier/

Manufacturer

Jurisdictional Officer

DTA

Special Economic Zones

Goods shall be cleared either:

under bond; or

as duty paid goods under claim of rebate

on the cover of ARE-1*Authorised

Officer

Examination at

the time of entry

of the goods intoSE

Endorsed copy of ARE-1

and ill of E!port

Endorsed copy of

ARE-1 and ill of

E!port to be

for"arded "ithin

!" days

#learance of

$oods after

e!amination

for use

"ithin %E&

#onstruction site / factory

India Outside India

#learance of

$oods for e!port

$

%

&

*Bill of export to be filed in addition if the goods cleared under export entitlement

Procedure to be followed by a DTA Supplier


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Availability of exemptions to supplies of vendors (OEM)appointed by the Main Contractor

Since Section 26(1)(c) provides exemption to goods brought from the DTA,

if the vendor (OEM) sells the goods to the Main Contractor but ships /consigns the goods directly to the SEZ, the exemption from excise should be

available to such Vendor as well

That is to say, regardless of validity of Rule 10 & 27, the vendor ( OEM) who

is a Subcontractor can claim benefit of excise duty exemption


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Availability of exemptions to supplies of vendors (OEM)appointed by the Main Contractor

However, if the vendor (OEM) ships the goods to the Main Contactor, who

after taking delivery of the goods ship the same to the SEZ Unit/Developer,then the exemption to the vendor of excise duty is likely to the denied

Important to note that the denial of excise duty exemption to the Vendor(OEM) would apply regardless of the fact that Rule 10 & 27 may be

construed to be valid. The reasoning being : Unlike physical export, where under the CT1 procedure contemplated under

Notification 42/2001, the merchant exporter can procure goods without payment

of excise duty and therefore physically export the goods, this procedure has not

been envisaged in the SEZ Act/Rules

Instead, the SEZ Act contemplates exemptions of excise duty only on goodsbrought from the DTA to the SEZ

Contd


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Availability of exemptions to supplies of vendors ( OEM)appointed by the Main Contractor

Since the exemption applies at the point of manufacture, therefore the condition

should typically apply at the above point In other words, the goods should be brought from the factory of the vendor

(OEM) to the SEZ without the physical intervention of the Main Contractor

Procedure under the above situation would remain similar to that indicated

earlier


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SERVICE TAX ONPROCUREMENT ANDSALE


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Credit of service tax paid on procurement of services

Section 26 provides for exemptionof service tax on taxable services provided to aSEZ Developer / Unit to carry on authorized operations

Accordingly, the Contractors providing services to SEZ Developer / Units are exemptfrom payment of service tax

Legislative provisions

Issues for discussion

Applicability of Rule 6 of the Cenvat Credit Rules, 2004

Rule 6(1) provides that cenvat credit shall not be allowed on such quantity of input orinput services which is used manufacture of exempt goodsor in rendering exemptservices

Rule 6(6)(i) provides that Rule 6(1) shall not apply if the excisable goodsare clearedwithout payment of duty to a Unit in a SEZ

Provision of services by a Contractor to a SEZ are exemptfrom payment of servicetax accordingly in terms of Rule 6(1) ineligibility of input credit and resultant loss ofcredit


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Supply of goods by a manufacturer to a SEZ exempt from excise duty however, therestriction of Rule 6(1) does not apply because of operation of Rule 6(6)

From credit perspective provision of services to SEZ accorded an unfair treatmentas compared to supply of goods

No apparent rationale for different treatment of goods and services from a creditperspective!!!



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Availability of Duty Drawback

Duty drawback available for goods under Rule 30 of the SEZ Rules

No provision for duty drawback for services

Another instance of provision of services to SEZ being accorded an unfavourable

treatment over supply of goodsParity with export of services

For export of services out of India, refund/ rebate of service tax paid on inputservices is available

Purpose is that export should be of services and not of taxes

However, on provision of services to a SEZ Developer/ Unit , under the Export ofservice Rules no refund/ rebate contemplated on supplies to SEZ

Non eligibility to credit / refund / rebate / duty drawback amounts to levy of taxes onservices that are to be exported ultimately

No apparent rationale for such treatment !



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Export under SEZ Act v. Export of services under service tax laws

Under the SEZ Act, export defined such that providing services from theDomestic Tariff Area to a Unit or Developer would qualify as export for thepurposes of the SEZ Act

This definition is entirely different from the conditions required to qualify asexport of service under the service tax laws

To qualify as export of service under service tax laws in addition to otherconditions, the service has to be used outside India and provided outside India

Under section 53 of the SEZ Act, an SEZ deemed to be territory outside thecustoms territory of India.

The usage of the phrase outside the customs territory of India must bedistinguished from the phrase outside of India, which is used to determineexport of service



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Export under SEZ Act v. Export of services under service tax laws (contd)

Not an appropriate construction of statutory interpretation to interpose thedefinition under the SEZ Act for the purposes of satisfying the conditionsascribed in the service tax laws and vice versa

Section 51 of the SEZ Act provides that the provision of the SEZ Act shall haveeffect notwithstanding anything inconsistent therewith contained in any other lawfor the time being in force

Correct interpretation of Section 51 of the SEZ Act should be, where in thecontext of a subject directly covered under the SEZ Act, there is a contradictionbetween the provisions of the SEZ Act and any other law, the SEZ Act wouldprevail



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Export under SEZ Act v. Export of services under service tax laws (contd)

The benefits available to export of services flow from the service tax laws

Under service tax laws export defined differently from the way export is definedunder SEZ

Thus, there is a conflict between the way export is defined under the two laws Even though there is a variance of what constitutes export under both the laws,

the same does not arise in connection with operations / benefit provided in theSEZ

Further, since the benefit is being provided under the service tax laws, thedefinition under the service tax laws would have to be considered



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Had the benefit for export of services been provided / claimed under the SEZ Act,the definition under the SEZ Act may have prevailed

For the purposes of service tax laws, the definition under the SEZ Act cannot beimported

Thus, as the conflict is not in an area pertaining to a benefit / subject covered by

the SEZ Act, Section 51 ought not to have any operation



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Impact of Rule 10 & 27

If Rule 10 & 27 held to be valid, then, the Subcontractors would also be eligible forexemption from Service tax. Further in these cases, the following needs to be noted:

Fiscal benefits ( including Service tax) is restricted to goods and services, required forsetting up and maintenance of the factory building - No explanation of the scope ofthe term factory building;

However, the above restriction does not apply where the Project Owner is SEZDeveloper / Co-developer more extensive - covers all goods and services

Where however, Rule 10 & 27 are invalid, then the exemption from service tax wouldbe restricted only to services provided by the Main contractors

In these situations, the Contractor would be eligible for service tax exemption on all

supplies of services regardless of whether these are being supplied to a Unit or aDeveloper / Co-developer of SEZ

Benefit to Main contractors & Subcontractors


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Insert picture from stock hereIMPORTPROCEDURE


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SEZ Unit

Bankers

Goods cleared from the customs portbased on the assessed BoE

CustomsAuthorities at

the port ofimport

SEZ Customsauthorities

Quintuplicatecopy(transshipmentcopy)tobefiled

withtheCustomsAuthoritiesattheportofimport

Transshipment copy to accompany thegoods to be transported from the port

to the SEZ

5 copies of BOE for Home consumption

Goods verified andadmitted into SEZ

1

2BOE Assessed - Triplicate, Fourth& Fifth copy returned to SEZ Unit

3

4

56

Fourth copy sent to the banker Triplicate retained

7

Standard procedure for imports


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STATE EXEMPTIONS(SELECT STATES) -GENERAL COMMENTS


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No exemption from State / local levies directly granted under the SEZ Act,

since the provisions of the Act do not override State legislations

The Act empowers the States to grant exemption from State / local levies to

SEZ Developers / Units

directly or

through delegated legislation

Many States have initiated the process of granting indirect tax benefits to

SEZ Developers / Units

However, States are not consistent in

Level and extent of indirect tax benefits granted

The legal framework for grant the indirect tax benefits

State exemptions General Comments


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The indirect tax benefits have been / are proposed to be extended through one or

more of the following: SEZ Policy

SEZ Act

Specific provisions in VAT / other State tax legislations

Notifications issued under the SEZ / VAT Acts etc

Most States grant benefits on the procurements from DTA. Most of these benefits are

applicable to procurements from DTA for works contracts / EPCs

The following slides contain an overview of the legal framework and extent of indirect

tax benefits granted by select States

State exemptions General Comments


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No

Yes

No

No

Notifictionsunder VAT

laws

Currentprovision doesnot confer anyspecial benefits

Yes

(generalprovision of

grantingexemption)

No

Yes

Provisionsunder VAT

laws

YesNoNoNo'arnata(a

NoNo

Yes

(To benotified)

Yes)aryana

NoNoYesYes*u+arat

NoNoNoYesAndhra ,radesh

Notificationsunder Entry

Tax laws

Provisionsunder

Entry Taxlaws

SEZAct

SEZPolicy

Overview of Legal Framework


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Yes

(Under SEZ Act)

Yes

(issued undersales tax Act still

applicable)

Yes

(Restricted tocertain supplies

by SEZs)

Notifictions

under VATlaws

No

Yes

Yes

(Restricted tocertain supplies

by SEZs)

Provisions

under VATlaws

NoNoYesYes-ttar ,radesh

YesNoNoYesTamil .adu

NoNoYesYesMaharashtra

Notifications

under EntryTax laws

Provisions

underEntry Tax

laws

SEZ

Act

SEZ

Policy

Overview of Legal Framework


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Legends : Exempt : Not exempt

-ttar ,radesh

(On direct imports from foreign country for usein manufacture)

(Zero-rated / exemption notification)Tamil .adu

Maharashtra

Exemption proposed under budget 2007'arnata(a

(If meant for use in manufacture of goods tobe exported))aryana

(On inputs)(On inputs)*u+arat

(Zero-rated)Andhra ,radesh

Entry TaxVAT / Sales tax

Procurements from DTA

Benefits to purchases by Units
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Legends : Exempt : Not exempt

-ttar ,radesh

(exemption notification)

Tamil .adu

Maharashtra

Exemption proposed underbudget 2007'arnata(a

)aryana

(On inputs)(On inputs)*u+arat

Andhra ,radesh

Entry TaxVAT / Sales tax

Procurements from DTA

Benefits to purchases by Developers
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At the time of assessment, it shall be specifically examined whether the goods are forauthorised operations

On arrival of goods, Authorised Officer shall examine the goodsin respect ofdescription, quantity, marks and other relevant parameters

Where goods are procured under the claim of export entitlements, Officer shallexamine the goods as per the export norms

Endorsed copy of Bill of Export and ARE-1shall be treated as proof of Export

Drawback or DEPB credit against supply of goods by DTA supplier shall beadmissible provided payment for the supply are made from the Foreign CurrencyAccount of the SEZ Unit

Goods may be supplied by the DTA supplier who is a trader or a merchant exporterunder a cover of invoice and ARE-1 shall not be required in that case

Examination at the time of entry to SEZ

Exemptions drawbacks and concessions to


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Exemptions, drawbacks and concessions toevery Developer and entrepreneur

(1) Subject to the provisions of sub-section (2), every Developer and the entrepreneurshall be entitled to the following exemptions, drawbacks and concessions, namely: -

(a) exemption from any duty of customs, under the Customs Act, 1962 or the CustomTariff Act, 1975 or any other law for the time being in force, on goods imported into, orservice provided in, a Special Economic Zone or a Unit, to carry on the authorised

operations by the Developer or entrepreneur;

(b) exemption from any duty of customs, under the Customs Act, 1962 or the CustomsTariff Act, 1975 or any other law for the time being in force, on goods exported from,or services provided, from a Special Economic Zone or from a Unit, to any placeoutside India:

(c) exemption from any duty of excise, under the Central Excise Act, 1944 or the CentralExcise Tariff Act, 1985 or any other law for the time being in force, on goods broughtfrom Domestic Tariff Area to a Special Economic Zone or Unit, to carry on theauthorised operations by the Developer or entrepreneur

Section 26 of SEZ Act

Exemptions drawbacks and concessions to every


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(d) drawback or such other benefits as may be admissible from time to time on goodsbrought or services provided from the Domestic Tariff Area into a Special Economic

Zone or Unit or services provided in a Special Economic Zone or Unit by the serviceproviders located outside India to carry on the authorised operations by the Developeror entrepreneur;

(e) exemption from service tax under Chapter-V of the Finance Act, 1994 on taxableservices provided to a Developer or Unit to carry on the authorised operations in aSpecial Economic Zone;

(f) exemption from the securities transaction tax leviable under section 98 of the Finance(No. 2) Act, 2004 in case the taxable securities transactions are entered into by a non-resident through the International Financial Services Centre;

(g) exemption from the levy of taxes on the sale or purchase of goods other thannewspapers under the Central Sales Tax Act, 1956 if such goods are meant to carryon the authorised operations by the Developer or entrepreneur.

(2) The Central Government may prescribe the manner in which, and the terms andconditions subject to which, the exemptions, concessions, drawback or other benefitsshall be granted to the Developer or entrepreneur under sub-section (1).

Exemptions, drawbacks and concessions to everyDeveloper and entrepreneur


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'ermission for procurement of items( ) he Approval #ommittee may permit $oods and

services to carry on the operations authori+ed under rule ,:

'rovided that for the %pecial Economic &ones set up by the #entral Government

the $oods and services re.uired for the authori+ed operations may be approved by

the oard:

'rovided further that e!emptions dra"backs and concessions on the $oods and

services allo"ed to a /eveloper or #o-developer as the case may be shall also be

available to the contractors appointed by such /eveloper or #o-developer and all

the documents in such cases shall bear the name of the /eveloper or #o-developer

alon$"ith the #ontractor and these shall be filed 0ointly in the name of the /eveloper

or #o-developer and the #ontractor:

'rovided also that the /eveloper or #o-developer as the case may be shall be

responsible and liable for proper utili+ation of such $oods in all cases(

Rule 10 of SEZ Rules

Benefits to Contractor appointed by a Developer


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Benefits to the Contractor appointed by SEZ Unit

A nit or /eveloper may import or procure from the /omestic ariff Area "ithout paymentof duty ta!es or cess or procure from /omestic ariff Area after availin$ e!port

entitlements or procure from other nits in the same or other %pecial Economic &one or

from E!port 2riented nit or %oft"are echnolo$y 'ark nit or Electronic 3ard"are

echnolo$y 'ark nit or io-technolo$y 'ark nit all type of $oods includin$ capital

$oods 4ne" or second hand5 ra" materials semi-finished $oods 4includin$ semi-finished

6e"ellery5 component consumables spares $oods and materials for makin$ capital$oods re.uired for authori+ed operations e!cept prohibited items under the Import rade

#ontrol 43armoni+ed %ystem5 #lassifications of E!port and Import Items

'rovided that e!emptions from payment of duty ta!es or cess dra"backs and

concessions on all types of $oods and services re.uired for settin$ up and maintenance

of the factory buildin$ allo"ed to a nit shall also be available to the contractors

appointed by such nit and all the documents in such cases shall bear the name of thenit alon$ "ith the #ontractor and these shall be filed 0ointly in the name of the nit and

the #ontractor:

'rovided further that the nit shall be responsible and liable for proper utili+ation of such

$oods and services in all cases(

Rule 27(1) of SEZ Rules

Indirect Tax Benefits on Supplies to SEZ- Contractors Perspective- Final

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Transcript of Indirect Tax Benefits on Supplies to SEZ- Contractors Perspective- Final