The commerce and industry ministry has asked the finance ministry to exempt 100 per cent Export Oriented Units from paying the central sales tax.
It has also sought a remedy for multiple incidence of education cess on sales made by EOUs to the Domestic Tariff Area.
Under the Foreign Trade Policy, 100 per cent EOUs are required to pay CST on capital goods and raw materials, which is refunded later.
The commerce and industry ministry, in its representation, said that even though the CST was refundable as the special economic zones were exempt from the tax, the requirement to pay CST by EOUs was leading to blocking of funds.
Similarly, while working out the rate and payment of excise duty, EOUs have to consider the education cess once while working out the rate of duty on imported goods and again at the time of the DTA sale.
In order to reduce input costs, the ministry has also sought the restoration of the Cenvat and duty drawback credit to EOU and SEZ units on fuels like high-speed diesel, light diesel oil and low speed diesel supplied to these units.
Until September 2004, HSD, LDO and LSD were being supplied to EOUs and SEZs from petroleum depots against which, they got exemption from excise duty. This facility was withdrawn in September 2004 and the Customs department issued a circular asking such units to claim Cenvat credit.
However, since petroleum products are not included in the Central Excise notification, these units are not getting the benefits of excise exemption, Cenvat credit or the duty drawback credit.
The ministry has also asked the finance ministry to undertake measures to simplify procedures and implement some of the announcements made in the foreign trade policy.
For instance, the policy had stated that the settlement commission in the Central Board of Excise and Customs is to be empowered to decide cases of regularisation of export obligation default and settlement of Customs duty with interest with effect from April 2005. The necessary changes have to be made in the Finance Bill.
EOU tax trouble