SEZ developers want CST removed on domestic sale

Goods bought from special economic zones for use in the domestic market should be exempted from the central sales tax in the lines of imports which are not levied CST, an industry body of SEZ developers has said.

The Export Promotion Council for EOUs and SEZs has raised the issue with the Finance Ministry and is expecting a favourable response in the Budget.

"Imports into the country do not attract CST, and since SEZs are treated as an area outside the customs territory of the country, the tax should not be applicable on goods bought from the SEZs by units in the domestic tariff area," EPCES director-general L B Singhal said.

At present, units in the DTAs have to pay two per cent CST on goods bought from the special economic zones.

Singhal said it did not make sense for the DTA units to buy things from SEZs because doing so would subject them to paying both the CST and customs.

"If the anomaly is not removed, there will not be purchases from SEZs for domestic consumption and the purpose of SEZs to accelerate economic activity will not be served," Singhal said, adding, "as it is SEZs are feeling the heat of the global economic slowdown."

Despite exports from the tax-free enclaves posting about 50 per cent growth in 2008-09 at Rs 99,689 crore (Rs 996.89 billion), the figure fell short of the 1,25,000-crore target for the fiscal.

Of late, SEZ developers have been seeking either withdrawal or more time for completion of projects.

Early this month, the government gave in-principle approval to DLF for withdrawing four of its IT/ITeS special economic zones, which the realty major did not want to build in the face of slowdown in the real estate business.

The K Raheja Group was allowed more time to build its tax-free zones in Goa, Hyderabad and Navi Mumbai.