The Commerce Department is actively considering the IT industry’s request for further extension of the hybrid working model for IT-ITeS units operating in SEZs beyond December 31, 2024, sources have said. This will enable them to allow employees to work from any place outside the SEZ for some more time while continuing to physically operate its office in the SEZ.

“Some in the industry have demanded that the hybrid model be allowed for an indefinite period of time as it is working well for them with some employees working from office and others outside as per requirement. But an indefinite extension is difficult. If an extension is indeed allowed for the hybrid model, it will for a limited period of time. The government is looking into it,” a government source tracking the matter told businessline.

Any extension is likely to continue to be subject to the condition that the unit continues to operate from the premises as per their Letter of Approval, the source added.

Last year, following demands from industry body NASSCOM, the Commerce Department had allowed a hybrid working model for the IT-ITeS units in SEZs for a year till December 31, 2024. This was a shift from the earlier work from home (WFH) model which allowed IT-ITeS employees to work from home till December 31, 2023.

“SEZ developers were concerned that if the WFH model was allowed to continue, IT-ITeS units may stop operating from SEZs altogether resulting in losses for them. However, most IT-ITeS units wanted the freedom to allow employees to do WFH as many, who had gone back to their hometowns during the COVID pandemic, were finding it difficult to move back. That is why the government came up with the idea of a hybrid model where SEZ units have to keep operating from within the SEZs but some of their employees could do WFH,” the source explained.

Although the IT/ITeS units in SEZs have now been given enough transition time to stabilise their operations, the industry has been arguing that the flexibility that the hybrid model gives to them in their operations increases their efficiency and also cuts cost, the source said.

“The government is sympathetic to the needs of the IT-ITeS industry. A decision on the demand for extension of the hybrid model will be taken soon keeping in mind the legitimate requirements of the industry,” the source added.

The Centre has been taking steps to ensure that SEZs stay attractive to investors and units despite the phasing out of tax benefits. Last year, the government amended the Special Economic Zone (SEZ) Rules to allow demarcation of a portion of the built-up area in an IT/ITES SEZ as a non-processing area, subject to conditions including repayment of tax concessions attributable to the area. The move was seen by many in the industry as one that would help reduce vacancy and benefit REITs which have large SEZ space in their portfolios

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