In The News

Panel rejects demand for exempting supplies to SEZs from VAT

Turning down exporters demand for exempting supplies to special economic zones (SEZs) and export oriented units (EOUs) from VAT, the empowered committee said the existing practice of taxing these supplies and subsequently giving credit on the levy will continue. “We are against giving exemptions since it leads to tax evasion,” empowered committee secretary Mr Ramesh Chandra said. “If exemption is given directly, it would not be known whether a product is consumed within the country or exported,” he said. However, taxing the product and then reimbursing it does not lead to such a confusion, he added. As exports are first taxed and then reimbursed, supplies to SEZs and EOUs are also taxed first and then credit is given, Mr Ramesh Chandra said.

Exporters have demanded that supplies to SEZs and EOUs be exempted from VAT since their money gets blocked in the existing practice of first paying tax and then claiming credit. Commerce ministry has taken up the issue of some states putting VAT on supplies to SEZs and EOUs. The ministry had written to the empowered committee to ask states to emulate the example of Andhra Pradesh which has rated all supplies to EOUs and SEZs at zero, additional commerce secretary Mr G K Pillai said.