L.B. Singhal
Director General

EPCES CIRCULAR NO.56 DATED 21-7-04

Sub : Meeting with Shri Kamal Nath, Honourable Commerce & Industry Minister
on July 16, 2004

Shri Kamal Nath, Hon'ble Commerce & Industry Minister visited SEEPZ Special Economic Zone on 16-7-04. After visited few units he had detailed interaction with EOUs/SEZ Units.

In this meeting following important issues were discussed:-

1. SECTION 10A & SECTION 10B ISSUES

In this meeting I specifically informed the Hon'ble Commerce & Industry Minister that EOUs/SEZ Units are disappointed with the Budget as none of the proposal relating to Sections 10A & 10B of the Income Tax Act have not been considered in the Budget. Honourable Commerce & Industry Minister informed that these proposals, including the proposal of sunset clause under Section 10B of the Income Tax Act, will be looked into afresh. He informed that Government had very limited time for this Budget and next Budget will be coming in 7 months.

2. PROBLEMS FACED BY THE TEXTILE EOUs

I informed the Hon'ble Commerce & Industry Minister that in the Budget Textile Sector has been provided with a scheme of NIL rate of Excise duty, but the corresponding changes have not been done in the notifications relating to EOUs. As a result, sale in the DTA by the EOUs, of the Textile items, are subjected to higher rate of excise duty vis-à-vis the sale by the DTA manufacturers. Hon'ble Commerce & Industry Minister agreed to look into this issue and assured that this problem will be resolved within a period of one week.

In this context I would further like to mention that immediately after the announcement of the Budget we had taken up this issue with the Ministry of Finance, Ministry of Commerce and Ministry of Textiles, through personal interaction as well as through correspondence. Ministry of Textiles has already written to Ministry of Finance requesting to resolve this issue. Shri G. K. Pillai, Additional Secretary & DGFT, Ministry of Commerce has also already convened an inter-Ministerial meeting and discussed this issue. Shri Sharad Jaipuria, Chairman & myself had a meeting with Shri A. K Prasad, Director (Customs) today at 11.00 a.m. in North Block, Ministry of Finance.

3. EDUCATION CESS

I informed the Hon'ble Commerce & Industry Minister that instances have been reported from Falta Special Economic Zone that Customs authorities are asking 2% Education Cess even for import by SEZ Units. It was agreed that all imports by EOUs/SEZ Units should be exempted from Education Cess as these units are entitled for duty free imports. Hon'ble Commerce & Industry Minister agreed that this will be discussed with the Department of Revenue so that necessary instructions could be issued immediately.

This issue has been discussed further and it is clear now that Education Cess is not payable by EOUs/SEZ Units. In case any unit has been asked to pay the Education Cess, please send the complete details to me.

4. Important Gem & Jewellery issues like procurement against Diamond Imprest Licence, Replacement of Diamonds, Wastage Norms, Maintenance of accounts were discussed and Hon'ble Commerce & Industry Minister responded positively and has agreed to consider these issues in the forthcoming EXIM Policy.

5. In relation to EOUs regarding exemption from CST and exemption from Service Tax, Hon'ble Commerce & Industry Minister informed that the issues are under consideration and will be looked into in the forthcoming EXIM Policy.

6. It was informed to Hon'ble Commerce & Industry Minister that new EOU Scheme which has been forwarded by the Ministry of Finance will create further complications and the present Scheme with the Development Commissioners should continue. It was specifically informed to Hon'ble Commerce & Industry Minister that EPCES had sought reactions of EOUs throughout the country on this proposal. All the EOUs which have sent their responses have opposed this move and only one person has supported this. Reactions received from EOUs have also been submitted to Ministry of Commerce.

7. After discussing these issues, Hon'ble Commerce & Industry Minister pointed out that domestic sale from the EOUs to the extent of 50% of FOB value of exports is on the higher side and sale to this extent can not be permitted under the EOU Scheme.

In this meeting Shri V. Madhavan Nair, Development Commissioner, SEEPZ SEZ, Shri Jayant Dasgupta, Joint Secretary, Ministry of Commerce, Shri Baldev Singh, Joint Development Commissioner, SEEPZ SEZ, Shri Vishwas Dhoomal, Principle Secretary - Industries, Govt. of Maharashtra, Shri A. P. Kala, Chief Commissioner of Customs (Airport), Shri S. S. Sandhu, Zonal JDGFT and Shri Anthony De Sa, OSD to Honourable Commerce & Industry Minister were present. From the Council side myself, Shri T. Vasu, Vice-Chairman EPCES, Shri P. C. Nambiar, Regional Chairman EPCES SEEPZ, other Central Governing Council Members and Regional Governing Council of the region and other exporters of SEEPZ SEZ were present.