No exemption for SEZ units under the proposed Central Excise Bill

Officials get to audit businesses; duty recovery time increases to three years

The proposed Central Excise Bill, 2024, does not exempt excisable goods produced or manufactured in a Special Economic Zone (SEZ) and brought to any other place in India from duty. Any exemption will need to be notified separately by the Central government, if deemed fit, says the Bill.

The move, if implemented, could curb misuse of incentives and alleged duty evasion at SEZ units. However, according to a senior government official, the Bill is not expected to be a part of the upcoming full Budget of the new government.
 

Currently, central excise duty is levied on a select list of goods — tobacco, crude oil, gasoline, diesel, natural gas, and air turbine fuel — while the majority of goods have transitioned to the goods and services tax (GST) regime.
 

SEZ units enjoy special incentives and tax benefits, including exclusion from central excise duty. “...where the central government, having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of the duty of excise in regard to such goods or such other factors as may be relevant, is of the opinion that it is necessary to safeguard the interest of revenue, specify, by notification, such goods as notified goods and there shall be levied and collected duty of excise on such goods in accordance with the provisions of this section in such manner as may be prescribed,” the Bill reads. 
 

Even though the excise duty basket has only a few goods, it is a source of significant revenue for both Centre and states. States tax them via value added tax, rather than state GST. In FY24, the central excise collection was over Rs 3 trillion.  The proposed Bill also outlines the conditions, restrictions, and manner of availing and utilising excise duty credit. It proposes to replace the CENVAT (central value added tax) credit under the current regime with a specific section dealing with duty credit, namely central excise duty credit. Unutilised credit balances of duty paid under the existing act will be allowed to be transferred in the proposed act as transitional credit.
 

The Bill also advocates for certain powers to central excise officers, including a structured framework for audit. This is a departure from the current scenario where no formal audit is conducted by the excise officials. Other notable proposals include extending the time limit for the recovery of duties to three years, from the existing two years, and shifting the onus of registration onto the person desiring to avail Central Excise Duty Credit. The time period for granting a refund of duty by the department has also been reduced to 60 days from the existing three months. Saurabh Agarwal, partner at EY, believes that by streamlining processes and clarifying regulations, the Bill seeks to create a more conducive environment for businesses. 
 

“Key provisions, such as the transferability of unutilised credit balances and an extended time frame for duty recovery underscore the government’s commitment to facilitating smoother operations for enterprises,” he said. 
 

These measures, he added, not only simplify compliance but also foster a business-friendly ecosystem conducive to growth and innovation.

Revamp on cards
 

Structured framework for utilising excise duty credit proposed

CENVAT credit to be replaced by central excise duty credit

Definition of “related persons” simplified

Time limit for recovery of duties extended to 3 years, from the existing 2 years

Time period for granting a refund of duty now 60 days from the existing 3 months