SEZs set to bloom on single window
In a bid to attract large investments, the government has come out with a comprehensive package for special economic zones (SEZs), sweetened with a liberalised set of rules.
By TNN |
DELHI: In a bid to attract large investments, the government has come out with a comprehensive package for special economic zones (SEZs), sweetened with a liberalised set of rules. Procedures have been drastically simplified and a single-window for clearances has been provided in the new rules which would be notified on Friday.
Commerce and industry minister Kamal Nath said simplified procedures and tax breaks will enable SEZs to attract investments of about Rs 100,000 crore ��� which will help create five lakh new jobs ��� in the next three years.
Exports from SEZs are estimated to touch $5bn during the current financial year. According to initial estimates, exports during the April-December ���05 period stood at around $3.5bn. Investors from several countries, including Japan and Singapore, are looking at this new window, Mr Nath said.
Commerce and industry minister Kamal Nath said simplified procedures and tax breaks will enable SEZs to attract investments of about Rs 100,000 crore ��� which will help create five lakh new jobs ��� in the next three years.
Exports from SEZs are estimated to touch $5bn during the current financial year. According to initial estimates, exports during the April-December ���05 period stood at around $3.5bn. Investors from several countries, including Japan and Singapore, are looking at this new window, Mr Nath said.
Seven new SEZs are in operation and several others are expected to go on stream soon, he added. So far, the government has provided formal clearance to 51 SEZ projects and in-principle clearance to 66 projects.
Mr Nath was of the view that foreign investment could flow into those SEZs covering services sector areas like hospitals and entertainment. International finance centres are also expected to come up in a big way, to give a boost to SEZ exports, he said.
SEZ developers and SEZ units no longer have to approach the revenue department for duty exemption. They will automatically become eligible for it once the project is cleared.
Transaction costs would be cut down in a big way to help exporters become more competitive. Large investments are expected in IT, pharma, biotech, textiles, petro-chemicals and auto components, Mr Nath said.
The SEZ Act was cleared by Parliament last year and inter-ministerial consultations were on to finalise the rules. Nearly 600 suggestions were received and 400 of them have been incorporated, Mr Nath said.
The procedural simplification will give a major boost to exports, said LB Singhal, director general of the Export Promotion Council for EOUs and SEZs. It will also lead to a sharp reduction in transaction costs and facilitate construction of world-class infrastructure, he said.
Mr Singhal said overall, the package was good, but the government has to provide some flexibility on the labour front in the long-term. The rules for supply of SEZ items to the domestic market also need to be simplified, he said.
Instead of subjecting SEZ goods to full customs duty in the domestic market, the government should seek a refund of the import duty foregone on the inputs. On value addition, the government should only impose excise duty.
This facility is provided under the Kyoto convention on customs rules, Mr Singhal said. It is an international convention and there is no logic in imposing customs duty on value addition done within the country, he said.
The SEZ package provides for full income tax exemption to SEZ units for five years. For the next five years, the exemption is available for 50% of their profits. In addition to this, SEZ units are also entitled to tax exemption of ploughed back profits for another five years. For SEZ developers, the tax exemption is for 10 years.
SEZ units and developers are also exempted from customs duty on all imported inputs. On products sourced from the domestic market, they are entitled to excise duty exemption. All this will make SEZ operations cost-competitive, Mr Nath said.
In addition, overseas banking units (OBUs) provided for in the SEZ package will help exporters and developers to get cheaper finance.
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