TCS SEZ in TN gets part approval for ‘contiguity’

Amiti Sen New Delhi | Updated on November 25, 2019 Published on November 25, 2019

A file photo of TCS’ campus in Siruseri near Chennai   -  Bloomberg

The company had raised concerns on the SEZ sunset clause setting in on March 31, 2020

A request made by IT major TCS Ltd for grant of formal approval for its proposed IT/ITES Special Economic Zone in Tamil Nadu before it establishes contiguity between the two identified plots has been met partly by the government with one of the plots getting the nod.

In its submission to the Board of Approval (BoA) for SEZs, the company had expressed apprehensions that by the time it is able to establish contiguity by building structures such as sky-walks joining the two plots, the tax sops for units would lapse as the SEZ sunset clause was scheduled to set in on March 31, 2020.

The Board, in its meeting on November 15, formally approved the setting up of IT/ITES SEZ on one of the two plots (Plot No. H-11/2) measuring 10.25 acres. However, it ruled that the company would have to establish contiguity before it got formal approval for the second plot.

“No SEZ related activity involving SEZ benefits, setting up of units etc. will be approved on the other plot H-11/1B unless the condition of contiguity is complied with by the developer….,” according to the minutes of the BoA meeting.

With the government not yet disclosing whether it intended to extend the SEZ sunset clause beyond the current fiscal, there is uncertainty amongst investors as no SEZ operational on or after April 1, 2020 would then be eligible for income tax incentives.

Current sops

At present, there is 100 per cent income tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for the first five years, 50 per cent for next five years and 50 per cent of the ploughed back export profit for subsequent five years.

The BoA, in its previous meeting on October 4, had considered the proposal of TCS for formal approval for IT/ITES SEZ in SIPCOT IT Park, spread over two plots measuring 18.27 acres, but had granted it only an in-principle approval for its development, operation and maintenance. It was subject to the condition that no unit will be approved unless the condition of contiguity is complied with by the developer.

Tunnel, skywalk

“TCS Limited has stated that basically to create this contiguity with basement tunnel and skywalk structures across the software blocks, environmental clearance and other statutory approvals for the entire campus has to be obtained which will extend beyond the SEZ sunset clause deadline of March 31, 2020 and so they won’t be able to commence operations as a unit before March 2020,” as per the submission made to the BoA for its meeting on November 15.

The company further stated that it proposed to invest ₹900 crore in the SEZ unit and provide employment to 12,000 people.

“It requested that it should be allowed to start business operations before the deadline of March 31, 2020, based on its undertaking that the contiguity structures indicated in the Master plan and stated in the recommendation of the State government will be constructed by the company subsequently.

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Published on November 25, 2019
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