The commerce ministry will be the nodal ministry for companies wishing to apply for External Commercial Borrowings (ECB) to set up units in Special Economic Zones (SEZ).
The decision has been made in a recent meeting, between the finance and commerce ministries, on the type of benefits that SEZ units would need to become attractive business propositions. Senior government officials said no decision had, however, been taken on giving exemptions from service tax to SEZ units.
They said though the finance ministry was the nodal ministry for granting permission to apply for ECBs, the interests of the development of SEZs would be best served if the commerce ministry was assigned the responsibility. Most of the ECB applications are expected to be less than $ 100 million each, and decisions will have to be taken fast. They said the commerce ministry being in touch with the needs of the firms, would be able to examine the demands better.
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According to them the two ministries have not arrived at a final decision on the issue of withdrawing service tax from SEZ units.
The demand from the commerce ministry entails a waiver to improve their competitiveness and enthuse a large number of entrepreneurs.
However, finance ministry officials said a review of the decision was possible even before the budget for next fiscal. They said since none of the zones had become operational so far, the question of a possible disincentive because of the tax was not valid.
The meeting has also postponed taking any decision on a waiver from Special Additional Duties for the SEZ units. Sources said since the revenue implications were not clear it was difficult to take a stand.
While the commerce ministry will be responsible for the operation of the route, the Reserve Bank of India will be responsible for setting the overall policy parameters on ECB for SEZ units.
Currently, the apex bank is responsible for clearing ECB applications of less than $ 100 million. Loans of higher denominations are cleared by the finance ministry.