The differences between the commerce and revenue departments have led to the government postponing the notification of consolidated customs and excise rules for special economic zones by two months to October 15.
Commerce department officials said that a consultation mechanism had been set up for the two ministries to iron out the differences over the notifications, which were to be issued by August 15.
Revenue department officials said they were in favour of issuing the circulars, as it would allow them to retain control over the fiscal issues governing SEZ.
The commerce department, however, did not support this. Commerce Secretary Dipak Chatterjee had written to Revenue Secretary Vineeta Rai seeking deferment of the notifications, pending clearance of the comprehensive SEZ bill by the Cabinet.
Commerce department officials added that the draft rules, circulated by the revenue department, were restrictive and the department sought clarifications before the revenue department notified them.
They said some decisions taken at the time of the Exim Policy were not incorporated in the notifications.
The commerce department also complained of making the new rules more restrictive than the existing ones, and in certain cases it was pointed out that the provisions governing the units in domestic tariff area was more flexible than those for SEZ units.
Revenue department officials, however, said the critical issue was who should administer the tax regime for SEZ. They cited the loopholes in various export promotion schemes run by Director General of Foreign Trade and said they would lead to revenue losses.
Among the various issues, commerce department officials pointed out that while imports from DTA to SEZs was made duty free, their export into the DTA was being treated at par with those from other customs territories.
For instance, the applicable rate of import duty would be imposed on a finished product put on sale by an SEZ unit to a DTA, though the unit concerned only imported an input duty-free.
The officials said the commerce department was proposing a product-wise input-output mechanism on the lines of the standard input output norm used for duty neutralisation schemes.
Such a mechanism was already being used following international conventions on the issue, they pointed out.
Sources said that while additional secretary in the commerce department Vinay Bansal and member customs in the Central Board of Excise and Customs Mahendra Prasad would co-ordinate on the issue, the possibility of the finance and commerce ministers was not ruled out.