States eye SEZ social infrastructure

NEW DELHI: State governments are contemplating levying stamp duty on non-processing areas in the special economic zones (SEZ). This could spell trouble for many SEZs that have grand plans for non-processing areas. The promoters can use up to 50% of the SEZ area as non-processing zone for activities such as housing, health facilities etc. All this could now attract stamp duties, resulting in escalation in costs. The new rule would not require amendment to the SEZ rules.

This would also mean that anybody leasing out space in a shopping complex situated in a zone will have to pay stamp duty when he registers the lease. In most states, the stamp duty rate varies between 8% and 12% of the registration cost.

“There is a growing concern among states about the revenue they will lose because of tax exemptions given to SEZs. Their view is that since the non-processing area doesn’t contribute to the activity for which the zone was set up, it should not get tax exemption,” a government source said.

Some states have discussed the proposal with the Centre and are getting it examined by their law ministries. The proposal to levy stamp duty comes close on the heels of states deciding to levy value-added tax on supply of goods to non-processing area in SEZ. Non-processing areas of SEZs houses social infrastructure such as houses, schools, hospitals, malls and parks. SEZ developers have to leave 50% of the total land as non-processing area. Earlier, states were not levying stamp duty on registration of land for SEZs.

“Exemption from duties in non-processing areas is provided only for creation of social infrastructure such as housing, healthcare facilities, schools and education, and shopping malls. In case the exemptions are not provided, developers would stay away from creation of the infrastructure and the onus would fall on state governments for providing it. It would be a serious matter as one of the main objectives of SEZs is creation of world-class infrastructure,” says Export Promotion Council for EOUs and SEZs director-general LB Singhal.

He pointed that the zones are meant for creation of additional infrastructure and if developers are not encouraged to do it, then SEZs would put strain on the existing infrastructure.
deepshikha.sikarwar@timesgroup.com