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Think Tank Proposes SEZ Policy Change to Boost Value Addition

Benefits, Challenges, and Ensuring Trading Balance

Mumbai : The Global Trade Research Initiative (GTRI), is a renowned think tank and has proposed a game-changing policy shift that will be benefiting companies trading from India’s Special Economic Zones (SEZs. As of 2023, India boasts 272 operational SEZs employing 2.8 million workers, significantly contributing to exports, totaling a substantial US3 billion, with service exports at about 60%. GTRI recommends allowing SEZ-manufactured products in the domestic market, subject to foregone input duties, sparking debates on benefits and challenges.

Benefits :

The said proposal will boost value addition and technological advancement within SEZs. Units in SEZs can currently sell products in the Domestic Tariff Area (DTA) based on duty payment for finished goods.

Challenges :

However, a critical debate surrounds the core purpose of SEZs, which are foreign territories for trade and duties.  If  SEZ-made goods are allowed into the DTA without import duties, it will discourage exports. Moreover it will alter the zones’ primary focus. As well as, it will be harming local Traders in Domestic industry and may also lead to business and job losses. Concerns about unfair competition and lower-priced SEZ-made goods due to duty exemption have also been raised.

India’s Export Role :

SEZs have played a pivotal role in India’s exports, with total exports reaching USD 155.8 billion in 2022-23, including USD 61.6 billion in merchandise and USD 94.2 billion in service exports.

Balancing Act for the Government

The proposal forces the government to balance value addition and the export focus of SEZs.  Considering the facts stakeholders from various sectors are expressing opinions on the policy shift.  It is being said that the government will be conducting a comprehensive evaluation before coming to any decission. They will be ensuring that the decision aligns with the best interest of Nation.

Ensuring Trading Balance

The ongoing debate raises a crucial point: the current 100 percent tax exemption on exports for SEZ companies. If duty-free domestic market entry becomes a reality, maintaining a level playing field in trading is crucial. Stakeholders suggest extending the 100 percent tax exemption to companies outside SEZs or reconsidering the exemption within SEZs to promote value addition without distorting trade dynamics.

 

Disclaimer : The article is on the basis of the news published in Business Standard online. However the views are of the expertise of the Import Export field.

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