25-Apr-2012 | 11:10 IST | Edited by: Sharmila Maitra

The commerce department has proposed fresh tax concessions and a cut in the minimum area requirement to a quarter of the present specifications.

It could be a second innings for special economic zones, especially those held up for years.

The department has declared that any zone that is not built around the identified 40 million-plus cities and state capitals will be eligible for duty benefits on capital investment for construction of hotels, hospitals, schools and colleges, residential and business complexes and training, leisure and entertainment facilities in what is billed as nonprocessing area (NPA) infrastructure.

It was also suggested that the zones shall be eligible for tax concession if built 50-100 km from an urban conglomerate, with the facilities for exclusive use of SEZ employees.

SEZs constructed in 123 backward districts may also be used by those who are not part of the zone, a 48-page note said. Currently, a NPA can't exceed half the area of an SEZ.

It is notable that since February 2006, 585 SEZs have been approved and 381 have been notified.

The department wants to extend the benefits of export schemes already available to entities outside the zones to SEZ units as well.

Presently, exports from all SEZs put together amount to Rs 3 lakh crore over six years, over 28% of shipments from the country. Moreover, a total of over Rs 2 lakh crore has been invested in SEZs so far and over 7 lakh people are employed in development and running of the zones and companies located there.

The number could have been much, but it wasn't due to several projects ran into land acquisition. To overcome this land problem, the commerce department has proposed not just cutting the minimum area requirement but also changing the rules for contiguity.

If the department's proposal comes in operation, a multi-product SEZ could be built over 250 hectares instead of the minimum floor area of 1,000 hectares at present.

Moreover, there is a concession planned for IT SEZs too i.e, the requirement of one lakh square metres of built-up area shall be insisted upon only if the IT or ITES zone is in Delhi (NCR), Mumbai, Chennai, Hyderabad, Bangalore, Pune and Kolkata. In case of 15 category B towns, this requirement is proposed to be fixed at 50,000 square metres and 25,000 for all other cities.

Developers can have over 50-60% of the processing area in one plot of land, while residential quarters, hospitals and schools can be built on another patch even if it is at a distance, once the plans are implemented.

A special mention should be given to the apex industry body Assocham, who has urged the government to do away with levies of 18.5% minimum alternate tax (MAT), units and 15% dividend distribution tax on SEZ developers in union budget 2011-12.

It has further suggested creating a policy encouraging multi-product SEZs on public-private partnership (PPP) model and the same may also be considered for SEZs based on thrust areas of infrastructure like power, energy and others. Also, within the multi-product zones, more flexibility is proposed to be given in creating sector-specific areas if the land area is exceeded.

Moreover, it has asked the government to provide facilities like power supply, connectivity, basic infrastructure like availability of water, land and labour to encourage the developers to set up SEZ projects in the rural belt rather than concentrating at urban/semi-urban areas.

Associated Chambers of Commerce and Industry of India (ASSOCHAM) is one of the apex trade associations of India. The goal of this organization is to promote both domestic and international trade, and reduce trade barriers. The organisation represents the interests of trade and commerce in India, and acts as an interface between industry, government and other relevant stakeholders on policy issues.

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