Govt looks to take ordinance route to align SEZ Act with GST

Delhi/NCR

Days before the goods and services tax (GST) is rolled out, the government will rush an ordinance to amend the law for special economic zones to align it with incoming tax regime.

The government is also working on a scheme that will directly transfer some taxes paid by exporters to their accounts to ensure a smooth ride for exporters when this reform is rolled out.

"We are looking at ordinance route to amend the SEZ Act...Some provisions need to be changed in line with the GST," said a senior government official.

The SEZ Act is yet to be aligned with the GST, which seeks to replace central taxes such as central excise duty, service tax, counter vailing duty and a number of cesses and state taxes with one single levy.

The SEZ law has references to current taxation regime which needs to now referenced to GST and for which the tax needs to be amended. The GST Council has provided for zero rating of supplies to SEZs, implying that no tax will be levied on them though they will be part of the GST regime.

Ordinance is being contemplated as the legislative changes are to be urgently carried out in line with GST roll out from July 1. Next Parliament session is expected to begin mid-July but these changes need to be in place when GST is rolled out.

Tax experts say the government should also provide clarity on registration of SEZ units in states.

"It is not clear as to whether an entity which has SEZ units in more than one zone in the same state will have to take separate registrations or one registration per state will suffice," said Pratik Jain, leader, indirect taxes, PwC India.

Separately, the government is putting in place a scheme to pass on some subsidy to exporters in lieu of taxes that will not be reimbursed through the refund scheme. The commerce department is working out the scheme that could be announced as part of the new Foreign Trade Policy. The official said the government would soon notify the rate schedule and rules.