MP unhappy with SEZ Act curbs

The MP government has strongly protested against provisions of the Special Economic Zone Act, 2005, which has deprived the state of the powers of levying stamp duty and registration fee on any developer or unit.

Parliament has amended Section 2 of the Indian Stamp Act, 1899, also for the purpose, to bring the second Act in line with the first.

The new amended Act has withdrawn the powers of Madhya Pradesh and some other states to levy stamp duty and registration fee on developers in the special economic zones.

A number of private players have joined the SEZ bandwagon in Madhya Pradesh, where a lot of land transactions are likely to take place.

"It is a loss to the state exchequer, engineered by the Union government. The amendment has been done violating constitutional provisions, according to which stamp duty is a state subject," a highly placed government source told Business Standard, adding, "other states have their own Stamp Acts and they will carry on levying stamp duty."

The source further said the issue would be raised in a meeting of state secretaries of taxes in New Delhi in January.

"The Law Commission has rejected this proposal of the government since it is applicable only to those states that do not have their own Stamp Duty Acts. Maharashtra, Karnataka, West Bengal and few other states are out of the ambit of the amended Act," the source said.

The state government will present the argument before the Union finance minister that SEZs permit only 25 per cent as operational area while the remaining 75 per cent is utilised for non-operational activities like parks, cineplexes, restaurants, and residential colonies. These can earn the state huge revenue in the form of stamp duty and registration fee.

So far only one special economic zone is operational in MP, in Indore, which too is incomplete and has incurred a loss of Rs 40 lakh. An arm of the department of industries has developed this special economic zone.

State government officials will object to Section 50 of SEZ Act, 2005, which squeezes the powers of state governments to grant exemptions.

Section 50 reads: "The state government may, for the purpose of giving effect to the provisions of this Act, notify policies for developers and units and take suitable steps for enactment of any law: a) granting exemption from state taxes, levies and duties to the developer or the entrepreneur; b) delegating powers conferred upon any person or authority under any state Act to the development commissioner in relations to the developer or the entrepreneur."

The sub-section 51 (1) says: "The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any order law for the time being in force or any instrument having effect by virtue of any law other than this Act."