Andhra Pradesh, Gujarat CEZs may offer big-ticket incentives

NEW DELHI: India may offer big-ticket incentives such as zero goods and services tax or a corporate tax holiday to woo multinational companies to the proposed coastal employment zones in Andhra Pradesh and Gujarat.

Officials said the government is firming up incentives that may be offered to companies that commit to creating a certain number of jobs. These may include a matching public investment by the Centre in the two zones for infrastructure creation and a unified industrial tariff regime. A large number of multinational companies are scouting for locations that can offer low-cost labour with world-class infrastructure outside China.

A senior government official told ET that after several rounds of discussions at the Prime Minister’s Office, premier think tank NITI Aayog has been entrusted with preparing a detailed project report on coastal employment zones. “A high-level team from the Asian Development Bank will prepare a detailed project report for the two CEZs in Andhra Pradesh and Gujarat, one state each on the eastern and western coast of the country,” said the official, requesting not to be identified.

The official said two proposals being considered under tax incentives include either giving corporate profit tax holiday for five years to firms creating 10,000 jobs or a zero GST for three years and six years for creating 10,000 and 20,000 jobs respectively. “These will be an upfront benefit for firms in contrast to the corporate profit tax holiday accrued only after attaining profitability,” the Aayog proposed, according to the official.




“Either benefit will help attract large firms in labour intensive sectors such as apparel, footwear and electronic s.” Companies that do not commit to creating at least 10,000 jobs may not be offered tax benefit but may still benefit from the business friendly ecosystem of CEZs that may include liberal labour laws. The Aayog has proposed that on a matching basis, the central government commit to investing up to Rs 5,000 crore in each zone over a three-year period to help create necessary infrastructure and housing for a large resident workforce.

It also advocated uninterrupted electricity at globally competitive rates and sufficient administrative autonomy from states to create a liberal business environment. Other incentives being considered include flexible land conversion rules, liberal economic environment, proximity to deep draft ports, public investment and autonomy, trade facilitation and trade liberalisation. Creation of CEZs will not require any legislation at the central level.

The Aayog, which had first mooted the proposal for setting up a CEZ, has set up a high-level committee under its CEO Amitabh Kant to work with the two states to finalise detailed project reports and a formal proposal could be out soon, officials said. According to the Aayog, the Centre will have to play a crucial role in liberalising rules for trade while facilitating speedier trade from these zones. “Unify all industrial tariffs to 7%, a rate that would result in no decline in tax revenues while also liberalising the regime and eliminating incentives to misclassify imports to evade tariffs,” it said.

“Finally, the Centre will also need to provide for creation of bonded free trade zones or warehouses within the CEZs to facilitate free export and import with custom duty and local taxes applied only when firms located in the zones sell goods in the domestic market,” the Aayog said.