SSI Exemption - Export to Nepal still treated as Home Consumption!
FROM 1.3.2012, exports to Nepal is treated as exports to any other country, but the CBEC forgot to amend some notifications. DDT 2539-16 02 2015 pointed out,
Paragraph 5, Explanation clause "G" of Notification No. 8/2003-CE, dated 01.03.2003, reads -
G) "clearances for home consumption", wherever referred to in this notification, shall include clearances for export to Bhutan and Nepal;
When export to Nepal is at par with export to other countries, then if the export clearances made to Nepal is to be included in the clearances for home consumption, it will be a disadvantageous position for assessees clearing their goods for export to Nepal. Notification 8/2003 ought to have been amended accordingly.
This issue was discussed in the recent Central Excise Tariff Conference. Vizag Zone raised the issue:
In terms of SSI notification no. 8/2003-CE dated 01.03.2003, computation of clearances for home consumption, wherever referred in the notification, shall include clearances for export to Bhutan and Nepal. However, with effect from 01.03.2012, export clearances to Nepal have been made at par with all other countries. Further, CBEC vide Circular No.961/04/2012-CX dated 26.03.2012, has clarified that, in respect of Nepal, even if the export proceeds are received under Indian rupees, the clearances are still eligible for rebate or refund as the case may be. In such a case, it is not known why the export clearances to Nepal are still being considered as home clearances with reference to the limit of exemption available to an SSI under the notification referred. The condition in the notification is restricting the benefit to the Small Scale Manufacturers to the extent of clearances made to Nepal. Clarification is needed in view of the change in the treatment given to Exports to Nepal w.e.f. 01.03.2012.
Decision: The conference agreed that it was a valid suggestion and there was a need to amend notification no. 8/2003 - CE dated 01.03.2003 to bring parity in the exports to Nepal under various notifications. The conference recommended that Board may examine the same. However, it was also agreed that till the necessary amendments in SSI exemption are made, the present dispensation of treating exports to Nepal as domestic consumption shall continue to apply .
This anomaly is continuing for the last nearly four years. If people in Nepal come to know about this, they will call it a political strategy to block exports to Nepal and our already strained relations with Nepal will further be damaged. But Revenue is not bothered about foreign relations.
There is absolutely no reason or logic in treating exports to Nepal as domestic clearances, especially after 1.3.2012. The babus have simply forgotten to amend the Notification No. 8/2003-CE and a super ego will prevent them from admitting their mistake and amending it now. What they will perhaps do is substitute the whole notification with a new one in which they will remove Nepal. Wait for that rabbit from the hat and until then exports to Nepal are not really exports for SSI benefits.
Ease of doing business and precursor to GST!