Three years after slapping Special Economic Zones with minimum alternate tax that drove away investments, the Government has tried to revive investor interest by halving the minimum area requirement for multi-product and sector-specific zones and doing away with the condition totally for IT zones.
SEZ developers and units, however, are still feeling short-changed as no fiscal incentive has been extended to them. Finance Minister P. Chidambaram has firmly refused all attempts made by Commerce & Industry Minister Anand Sharma to reduce the level of MAT applicable on SEZs or extend export sops to units.
Sharma said that he had tried his best to push the issue with the Finance Minister, but things were not in his hands.
Despite lack of fiscal incentives, the operational flexibility given to SEZs could attract investors. In addition to reduction in minimum area required, sector-specific zones will be free to add additional sectors if they are get more land. Such zones will have the flexibility to set up additional units to encompass related areas under the same sector.
“The SEZ scheme has been a key instrument for promoting exports from India. I am happy to announce a package of reforms for reviving investor interest in SEZs,” Commerce & Industry Minister Anand Sharma said on Thursday.
The minimum area requirement for multi-product SEZs has come down to 500 hectares from 1,000 hectares while sector-specific SEZs will be allowed to come up in an area of 50 hectares, down from 100 hectares.
There would be no minimum land requirement for setting up IT/ITES SEZ and builders will have to meet only the minimum built-up area requirement.
“We have taken note of the fact that there are acute difficulties in aggregating large tracts of uncultivable land which is vacant and contiguous and thus reduced the minimum are required,” Sharma said.
An Exit Policy permitting transfer of ownership of SEZ units, including sale, has also been introduced in the SEZ Framework. Moreover, sector-specific SEZs have been allowed to bring in an additional sector for each contiguous (continuous) 50-hectare parcel of land. This means that a sector specific SEZ can go beyond its particular sector if it manages to get more land.
SEZ developers and units are disappointed that the Government has not exempted them from minimum alternate tax (MAT) of 18.5 per cent as was being hoped.
Neither have SEZ units been made eligible for the focus product and focus market schemes, which offer sops to exporters shipping select goods and selling to particular markets, available to domestic exporters.
“There is nothing in the policy to incentivise the developers who have acquired the land and got the zones notified, but are yet are not enthused enough to start operations,” pointed out P.C. Nambiar, Chairman, Export Promotion Council for EOUs and SEZs (EPCES).