We are buying some machines from a Special Economic Zone (SEZ). We want to know if we have to pay Value Added Tax (VAT) on such purchases. What is the position, if we buy under the Export Promotion Capital Goods (EPCG) scheme?
Sales from SEZ to Domestic Tariff Area (DTA) is not zero rated. You have to pay VAT, unless there is any exemption under VAT laws. However, if you pay VAT, the 4 per cent special CVD need not be paid, in accordance with exemption notification No. 45/2005-Cus. dated 16.05.2005. If VAT is exempted under any VAT laws of the State Government, then you have to pay 4 per cent special CVD.
Under the EPCG scheme, you have to pay customs duty of 3.09 per cent (including cess) under the 3 per cent EPCG scheme; and no duty, if you are under zero duty EPCG scheme. The export obligation will be based on the duty saved, i.e., the difference between the duty payable (usually 21.52 per cent for machinery) and the duty actually paid. However, VAT will be payable on the SEZ to DTA sales, unless any exemption applies under the State VAT laws.
Our customer is in a SEZ. He wanted to buy a car from us and will register the same in the company’s name. Can you please advise us about the excise role in this transaction?
If the goods are not required by the SEZ unit or developer for carrying out the authorised operations, then the goods cannot be supplied without excise duty payment. Also, no export benefits will also be available. However, if the goods are required by the SEZ unit or developer for carrying out the authorised operations, then the goods can be supplied without excise duty payment by following the ARE1 procedure given in Rule 30 of the SEZ Rules, 2006. Please note that ‘automobile cess’ will have to be paid. In this connection, you may refer to CBEC Circular no. 262/01/2007-CX dated 20.03.2007.
As per Rule 27 (2) of the SEZ Rules, 2006, in case of any doubt as to whether any goods or services are required by a Unit or Developer for authorised operations or not, it shall be decided by the Development Commissioner. The proviso to Rule 27 (3) also makes it clear that that any goods for the personal use of, or consumption by officials, workmen, staff, owners or any other person in relation to a Unit or Developer, shall not be eligible for exemptions, drawbacks and concessions or any other benefit in accordance with the provisions of sections 7 or 26.
On our single export consignment, there are some items on which we want to claim duty drawback and on some other items we want to claim DEPB. Is it possible? Do we have to file separate ARE1?
Yes, it is possible. You must file separate shipping bills and separate declarations. it does not matter if you stuff them in the same container. You need not file separate ARE1for the items in question.
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