Revenue Dept demand for GoM turned down
The final draft guidelines to revive Special Economic Zones (SEZ) may soon be put up before the Cabinet Committee on Economic Affairs (CCEA). The new norms are likely to be notified by this month-end.
This follows the Cabinet Secretariat turning down the Revenue Department’s demand that the draft guidelines need to be first sent to a Group of Ministers (GoM).
Official sources told Business Line that the Cabinet Secretariat insisted that the matter should now be considered by the CCEA. It went a step further stating that in future all matters related to SEZs would be taken up only by the CCEA, not the GoM, as was the earlier practice, they said.
After former Finance Minister Pranab Mukherjee demitted office to be the country’s President, the Government had disbanded many GoMs headed by him. Some of these, including the one on SEZ, will now be considered by the CCEA, the sources said.
The major changes in SEZ norms include reducing the minimum land area requirement for different types of zones as well as relaxing the contiguity and vacancy norms. There will also be targeted incentives to not only promote SEZs in backward areas with focus on manufacturing, but also Just-In-Time inventory management and Free Trade Warehousing Zones (FTWZ).
The policy revamp was necessitated following a fall in investments in SEZs due to the recent imposition of minimum alternate tax, dividend distribution tax and the forthcoming direct taxes code regime proposing to shift from profit-linked incentives to investment-linked ones.
The land norms are being eased due to the difficulties in acquiring large, contiguous, vacant and non-agricultural land for such zones.
The minimum area for a multi-product SEZ will be cut down from 1,000 hectares to 250 hectares; multi-services and sector-specific SEZs – from 100 hectares to 40 hectares; while it will remain the same for FTWZs, which is 40 hectares as well as for handicrafts/IT/gems and jewellery/bio-tech and non-conventional energy, which is 10 hectares each.
Also, there will be no duty benefit for building social infrastructure such as hospitals, educational institutes and entertainment facilities in SEZs in urban areas, but such benefits will be extended in backward areas.
The new guidelines will also state that as against the current rules, even those who are not employed in the SEZs and their relatives will be allowed to use such infrastructure (schools and hospitals) coming up in SEZs in backward areas.