Duty foregone

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 February 2016 We are a 100% EOU unit, in which we also remove goods to another SEZ / EOU unit and file ARE 1 or ARE 3 respectively, I would like to know what amount I should put under Duty Foregone Column whether the Duty as per Notn 23/2003 or 12.5% cenvat.

Asha Kanta Sharma online

Asha Kanta Sharma online

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21 July 2024 In the context of Export Oriented Units (EOUs) and Special Economic Zones (SEZs), when goods are removed from one EOU to another SEZ/EOU unit, the concept of "Duty Foregone" arises. Here’s a detailed explanation to clarify your query:

### Duty Foregone in EOU to SEZ/EOU Transactions:

1. **Nature of Transactions:**
- EOUs are allowed duty-free import of goods for manufacturing purposes with the condition that the finished goods are exported.
- When goods manufactured in one EOU are removed to another SEZ/EOU unit, they are considered as "deemed exports" under Indian tax laws.

2. **Calculation of Duty Foregone:**
- Duty Foregone refers to the customs duty and excise duty that would have been payable if the goods were not exempted or if they were sold in the domestic market.
- For EOUs, the duty foregone typically includes:
- Customs duty that would have been payable on imported inputs used in manufacturing the goods.
- Excise duty that would have been payable on domestically sourced inputs used in manufacturing.

3. **Value to be Reported:**
- Under the Export and Import Policy (Exim Policy) and related notifications, EOUs are entitled to various exemptions and concessions.
- For the purpose of reporting in ARE 1 or ARE 3 (documents for removal of goods to SEZ/EOU), the duty foregone amount is typically computed based on the customs duty and excise duty that would have been applicable if the goods were not exempted.
- The duty foregone amount should reflect the potential duty liability that is waived due to the EOU status.

4. **Specific Notfn. 23/2003 and CENVAT:**
- Notification No. 23/2003-Central Excise dated 31st March 2003 provides exemptions and concessions for goods removed from one EOU to another SEZ/EOU unit.
- If applicable, CENVAT (Central Value Added Tax) credit can be considered as part of the duty foregone calculation. It allows for the offset of excise duty paid on inputs and capital goods against excise duty liability on manufactured goods.

5. **Practical Considerations:**
- Consult with your tax advisor or customs consultant to determine the exact methodology and calculations for duty foregone based on the specific goods and transactions involved.
- Accurately report the duty foregone amount in ARE 1 or ARE 3 to comply with customs regulations and to benefit from the exemptions available to EOUs.

### Conclusion:

In summary, the duty foregone amount in EOU to SEZ/EOU transactions should encompass the customs duty and excise duty that would have been payable if the goods were not exempted under the relevant notifications and exemptions provided to EOUs. Ensure proper documentation and calculations to correctly report this amount in ARE 1 or ARE 3 for compliance and benefit from the concessions available under the EOU scheme.

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