SEZ law gets okay

NEW DELHI: After a protracted tussle between various government departments, the much-discussed legislation on Special Economic Zones (SEZs) was cleared by the Cabinet on Wednesday. Scraping of various levies imposed in the form of cess on agriculture commodities has also been approved. The proposed SEZ law provides a 10-year tax holiday for promoters, while the units located within these zones will get 100% tax exemption for five years. SEZ units will get 50% tax exemption for the next five years, official sources said after the Cabinet meeting. The other attraction for SEZ units is income tax exemption on 50% of ploughed back profits after the tax holiday period. SEZ developers will get 100% tax exemption for 10 years in a block period of 15 years, the sources said. Both SEZ units and developers will also be exempted from customs and excise levies. While the commerce & industry ministry was in favour of a longer tax holiday for SEZ units and developers, the finance ministry was keen to phase out the exemption. Finally, Prime Minister Manmohan Singh worked out a package after a meeting with finance minister P Chidambaram and commerce & industry minister Kamal Nath. The changes cleared by the Cabinet will help private sector SEZs to achieve financial closure and attract foreign direct investment (FDI). Many greenfield SEZs are in the pipeline and the proposed law is expected to help in improving their commercial viability. Information & broadcasting minister Jaipal Reddy said after the Cabinet meeting that the SEZ legislation was approved. It is expected to be introduced in the Parliament during the ongoing session. The move to abolish cess on agri commodities was proposed by the commerce department. This will lead to abolition of cess on various items, including spices, tobacco, coffee and marine products. At least half-a-dozen laws, including the Agricultural & Processed Food Products Export Development Authority Act, are to be amended for this purpose. The SEZ Act is supposed to provide a stable framework for tax exemption to SEZ developers and units located in these zones. The umbrella legislation provides for a single window approval mechanism for approving SEZs and units in such zones, besides providing special and stable fiscal provisions for developers, SEZ units and offshore banking units located in them.

SEZ law gets okay

After a protracted tussle between various government departments, the much-discussed legislation on Special Economic Zones (SEZs) was cleared by the Cabinet on Wednesday.

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