CENTRE TO CONSIDER 5 FRESH SEZ PROPOSALS
New Delhi
Deccan Herald
The government will consider five proposals for setting up special economic zones, on Tuesday —– including those of Brooke Bond Real Estates and Deccan Infrastructure.
The 19-member inter-ministerial Board of Approval (BoA), headed by Commerce Secretary Rahul Khullar, may also give formal approval to 25 developers for execution of their projects within an extended time frame.
The Board would also take a decision on requests of Lanco Solar and Cochin Airport International to set up special economic zones (SEZs).
Brooke Bond Real Estates plans to set up an IT/ITeS SEZ over 11 hectares in Karnataka, while Deccan Infrastructure has moved the BoA for permission to develop two tax-free zones in Andhra Pradesh, said the agenda document of the Board.
Of the 25 developers, including Ansal SEZ in Gurgaon (Haryana), Ranbaxy Laboratories in Mohali (Punjab) and Maytas Enterprises in Ranga Reddy (Andhra Pradesh), which have been given one-year additional time for their projects, may get formal approval for the extension, sources said.
Maytas Ventures SEZ Pvt Ltd has approached the BoA to surrender its 14.15-hectare sector-specific SEZ in Andhra Pradesh. The issue is also on the agenda of the BoA. Sanvo Resorts has also requested to de-notify its projects.
SMART INITIATIVES BOOST SEZ PROSPECTS
Vikram Bapat
The Financial Express
The ghost of Nandigram has not been exorcised. The steps taken by the government in the aftermath of the Nandigram debacle got back the feel good factor into the future of SEZ policy and its sustenance as a long-term growth engine. The action by the Supreme Court of quashing the plea put forward by Reliance for its Mumbai SEZ (MSEZ) evoked strong reactions and has created a false sense of uncertainty once again around the feasibility of large-scale multi-product SEZs around the country.
However, over the last two months, policymakers at the ministry of commerce have been active in issuing clarifications that have far-reaching positive consequences. Several open issues have been addressed through amendments and instructions. The pace, at which these decisions were taken and indeed auctioned, is a positive sign and the policymakers deserve a pat on the back for rising to the occasion. Some of the major initiatives are discussed here.
The first among them is that of vacant land. The connotation of ‘vacant land’ has always been a bone of contention. Though in a plain vanilla sense, vacant land has a straightforward meaning; potential investors saw this as a missed opportunity since availability of large tracts of vacant land is difficult.
A definition of ‘vacant land’ has since been inserted in the SEZ rules that defines it as the land where “there are no functional ports, manufacturing units, industrial activities or structures in which any commercial or economic activity is in progress.” To put it concisely, vacant land has an extended connotation to include land that has complete structures or non-functional ports. As long as such premise does not have any commercial or economic activity in progress, these areas are eligible to be potential SEZs. Ruins can be converted to riches.
The next issue is that of service tax exemption for services consumed wholly within the SEZ. On March 3, 2009, the ministry of finance issued notification 9/2009-Service Tax providing that all units and developers will now be eligible to claim refund of input taxes suffered. This was not well received by businesses, primarily for two reasons. One, SEZs were supposed to be tax-free zones, so why there should be a levy at all. Second, the process of getting refund is unfriendly, time consuming and mired in red tape. However, notification 15/2009-Service Tax dated May 20, 2009 was issued to provide unconditional exemption to services consumed within the SEZ without following the refund route. Thus, the requirement of first paying the tax and then claiming refunds is dispensed with.
Then there is the issue of leasing on a shift-to-shift basis and disaster management/recovery centres. IT/ITeS SEZ developers had sought clarification whether a developer can lease space in the IT/ITeS SEZ on a shift-to-shift basis. In response to this, an instruction was issued internally to the development commissioners by the ministry of commerce. This, perhaps, is the first step to address the concerns on SMEs who have always been complaining that the SEZ scheme never benefitted them. The instruction now lays down that SEZ developers can lease out space in IT/ITeS SEZ on a shift-to-shift basis subject to certain conditions. Clarifications are also to be issued to tweak procedure and the SEZ rules to enable implementation of this process.
The ministry has also recognised the reality that ITeS businesses, in particular, require a full time disaster management and business continuity mechanism. The instruction recognises this business reality and stipulates that disaster management/recovery centre of foreign companies can be set up in the IT/ITeS SEZs whether manned or not. Though there are practical issues involved here, the fact that the need is addressed is a step in the right direction.
Yet another issue is that of the movement of used/second hand assets. Perhaps the most controversial issue since the initiation of the SEZ regime is the question of whether used assets can be moved by a new unit into an SEZ or not. Instruction no 11 issued on May 27, 2009 has sought to address this question in detail.
So far the SEZ regulations have flip-flopped on the issue. The SEZ rules were amended in August 2006 to stipulate that no previously used machinery or plant could be considered for a new SEZ unit. This was coupled with a retrospective inclusion in section 10AA of the Income Tax Act of a sub-section that restricted movement of previously used machinery or plant subject to a maximum of 20% in value terms. Subsequently, the SEZ rules were again amended to remove the above stipulation on the ground that the income tax regulations had addressed this issue.
The writer is executive director, PricewaterhouseCoopers