To the extent I could fathom to the depths of the recent amendments referred to in the Article, it is seen that the single point objective of the Government is to torpedo the facility of “converting CENVAT Credit into cash” either through the “Rebate Mechanism” under Rule 18 of the Central Excise Rules 2002 or through the “Refund Mechanism” under Rule 5 of CENVAT Credit Rules 2004.

DTA suppliers resort to Rule 18 of Central Excise Rules for supply to SEZ, only with a view to exhaust the CENVAT Credit and get the Rebate in cash. This facility is now plugged as Rule 18 cannot be operated for supplies to SEZ.

Amendment to Rule 5 of CENVAT Credit Rules 2004 will now disqualify the supplies to SEZ either under Rule 19 or Rule 18 of the Central Excise Rules for computing the export turnover of goods on the numerator of the equation stipulated in Rule 5 of CENVAT Credit Rules 2004.

These amendments are yet another blow or a “hit below the belt” of the already ailing SEZs. Though the benefit is denied to the supplier in DTA it will ultimately have an impact on the pricing to SEZ. The Government could have been more transparent and the intention should have been highlighted, if not in the Budget Speech, at least in the TRU letter clarifying the Budgetary provisions.

There are greater swimmers who can fathom deeper on the implications on Indirect Tax proposals and we always welcome their views with great respect.

N.N.MENON
FOREIGN TRADE CONSULTANT
COCHIN

NARAYANA MENON 17/03/2015