NEW DELHI: A Parliamentary panel today suggested the government should revisit the special economic zone (SEZ) scheme to plug loopholes and prevent its misuse.
The report of the Public Accounts Committee (PAC), tabled by its chairman Murli Manohar Joshi in the Lok Sabha, said absence of mandatory exports in the SEZ Act has led to misuse of the scheme.
The Committee, however, said there is no mandatory requirement of undertaking exports in the SEZ legislation. This has whittled down the primary objective of the Act.
"Since the units located in the SEZs enjoy considerable tax benefits and are expected to fuel economic growth, the Committee, recommended that the misuse of the scheme must be prevented by revisiting the scheme and by plugging the loopholes in its implementation," it said.
The committee observed that out of an overall export of Rs 7,149.23 crore made by 22 SEZ units, the actual export content was only Rs 1,999.27 crore and the remaining related to earnings from selling of products in the domestic markets.
On this, the Finance Ministry has said that at least 51 per cent of the production of goods and services by a unit in an SEZ be physically exported out of India.
Concerned over small net foreign exchange earnings (NFE) from the zones, the Committee has also asked the government to strengthen the oversight mechanism to ensure that the policy is not misused.
"The committee recommend that the government need to establish an effective and reliable oversight mechanism for monitoring actual NFE achievements for prompt recovery of duty foregone/evaded and also to provide deterrent penal provision for willful default," it said.
They said the committee has found that the SEZ scheme relies mainly on self-certification of the SEZ units for NFEs and there is no institutional mechanism in place to assure that there is no misuse of SEZ policy.
"Apparently, the instant mechanism is far from sound to safeguard the interest of public revenue," the report said.
The committee said the collection of vital statistics (like quarterly performance reports) relating to NFE data cannot be based merely on self-certification of the SEZs units.
Further, it has endorsed the view of the Finance Ministry that the units enjoy considerable tax benefits and therefore the units must be export oriented to further economic growth.
"The SEZ legislation or rules made thereunder must make it mandatory for SEZ units to prevent recurrences pointed by the audit and ensure that at least 51 per cent of the production of their goods and services are exported physically out of India," it said.
The committee also recommended that a joint mechanism be established between the commerce and finance ministry to ensure unity of purpose and efficient execution of the SEZ scheme.