New Delhi, March 13, 2008: The Comptroller & Auditor General (CAG) has noted with concern that the government had to forego revenue amounting to around Rs 2,000 crore as SEZ units are allowed to treat their domestic sales as exports.

In its reports tabled in the Lok Sabha, the CAG said, “SEZ units have been achieving prescribed net foreign exchange earnings (nef) mainly through domestic sales defeating one of the sub-objectives of the scheme, which was to augment exports.” The CAG report noted with concern that the government had to forego Rs 1,043 crore only on account of customs duty exemptions to these units while pointing out that duty of Rs 106.71 crore along with interest of Rs 46.17 crore was recoverable from 24 units in SEZs.

The duty foregone on the SEZ scheme during 2000-01 to 2005-06 was Rs 8,842 crore, it said, adding for 2006-07 duty foregone would be Rs 2,146 crore as per Budget estimates. Referring to disadvantage to export oriented units vis-a-vis SEZ units, the CAG report said duty of Rs 681.38 crore was foregone on inputs used in manufacture of mobile phones cleared into domestic tariff area (DTA) at nil rate of duty in SEZs.

This duty could not be recovered, in the absence of provisions to pay back duty foregone on inputs utilised by manufacturers of such goods when cleared at nil duty in Domestic Tariff Area (DTA), according to the report.

Source: Deccan Herald