SEZ Bill offers 15-yr tax holiday

The government today introduced the Special Economic Zone Bill in the Lok Sabha providing for a fiscal package, including a 15-year tax holiday and a single-window clearance mechanism for units SEZs.

The Bill, which had been cleared by the Cabinet last week, provides for fiscal concessions for both developers and units in the zones and a legislative framework for setting up offshore banking units (OBUs).

SEZs will act as ports, airports, land stations and inland container depots and, in certain cases, they will be deemed to be outside the Customs territory of India.

The Bill aims to ensure availability of goods and services free of taxes and duties, with adequate infrastructure facilities and fiscal incentives (see box) to attract foreign and domestic investment.

The Bill will come up for discussion in the Lok Sabha tomorrow and Commerce Minister Kamal Nath is expected to introduce certain amendments to the Bill. Nath told reporters that the Bill was specific to the requirements of the country and had been prepared taking into account suggestions received from the various stakeholders.

State governments have been empowered to liberalise state laws to grant exemptions from state taxes, levies and duties to developers of SEZs and also to those setting up units.

The Centre will appoint development commissioners, not below the rank of a deputy secretary, to oversee the functions and to ensure single window clearance. The development commissioner may be put in charge of more than one such SEZs.

The Bill also provides for constitution of a Special Economic Zones Authority to oversee the functions. The Centre, however, will have the power to supersede the authorities in case they are unable to discharge their duties satisfactorily.

For investigation of offences committed in these zones, a single enforcement agency will be established for speeding up trials and the investigation process.

India has 11 functioning SEZs, of which seven have been set up by the Centre. Though approvals for 35 greenfield projects have been granted none of them have taken off due to uncertainty over the policy regime in the future. The Bill seeks to address these concerns.

According to the statement of objects and reasons of the Bill, the legislation is aimed at giving a long term and stable policy framework with minimum regulatory regime and to provide expeditious and single window clearance mechanism.

LEFT OBJECTS

The Left parties today asked the government to review the provisions of the SEZ Bill which seeks to provide labour law flexibilities at units in the designated zones.

Representatives from the Communist parties met Defence Minister Pranab Mukherjee in the afternoon and demanded that the government first study the implications of the proposed relaxations before moving ahead with the law.

"It will have serious implications on the job security," said a Left leader. The meeting was, however, inconclusive as the Left said that there was no need to rush with the legislation.

Fiscal sops

• SEZ units will be eligible for 100% tax exemption for the first 5 years, 50% for the next 5 years and 50% of the ploughed back export profits for the next 5 years
• The developers of the zones will get 100 per cent income tax exemption for 10 years in a block period of 15 years
• Tax cuts for incomes of OBUs and international financial services centres
• Certain tax deductions in profits
• Industrial undertakings, shifting base from urban areas will be exempted from capital gains tax