The Hindu Business Line : Govt may allow use of second-hand machinery in SEZs

New Delhi, July 6 The Commerce Ministry plans to relax existing restriction on use of second-hand plant and machinery by SEZ units, a top Department Of Commerce official said.

To ensure that SEZs have only new investments and there is no shift of businesses from the domestic tariff area (DTA) into these zones, the Government had stipulated in the SEZ rules that second-hand plant and machinery cannot be used by SEZ units.

The Commerce Ministry now wants to relax this stipulation so as to remove the paradox between existing SEZ rules and the income-tax law on the use of second-hand plant and machinery.

The intent is to allow use of second-hand plant and machinery to the level permitted in the income-tax law.

After Budget 2007-08, the income-tax law has been amended to specify that a SEZ unit would not lose tax breaks if the total value of used plant and machinery transferred to the unit does not exceed 20 per cent of the total value of plant and machinery used in the business.

This implies that a SEZ unit would get tax breaks if at least 80 per cent of its investments in plant and machinery are out of fresh investments.

“We will soon amend the SEZ rules to bring them in line with the I-T law position,” said Mr Yogendra Garg, Director, Department of Commerce, at an Assocham meeting on SEZs.

Mr Deepak Dhanak, Senior Manager, Tax & Regulatory Services, PricewaterhouseCoopers, said that the Government must address the dichotomy between the SEZ rules and the income-tax law on the issue of use of second-hand plant and machinery by SEZ units.

Meanwhile, an expert on direct tax said that the latest position of the Department of Commerce, i.e., the plan to amend the SEZ rules, indicated that the Ministry accepts the use of old machinery in SEZ units so long as it is in sync with the income-tax law.

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