Clash over SEZs continues, meeting minutes contested

The bad blood between the finance and commerce ministries on the controversial Special Economic Zones has now spilled over to the minutes of the last meeting of the empowered Group of Ministers (eGoM).

The minutes concerned specify an employment criteria and built-up area norms for information technology zones.

The two ministries are contesting the minutes and as a result, the employment issue is being referred back to the e-GoM, which is scheduled to meet on Tuesday.

"The decision at the e-GoM meeting on May 10 was that the employment criteria would only be a guiding principle and not a mandatory requirement, as that would be very difficult to monitor. The minutes circulated do not reflect this. Hence the issue is being referred back to the e-GoM," a senior commerce ministry official told Business Standard.

The circulated minutes want minimum employment of 10,000 persons for Tier-I cities, 5,000 persons for Tier-II cities and 2,500 persons for Tier-III cities.

The e-GoM will also take a decision regarding the norms for gems and jewellery, biotech and non-conventional energy. The Gems and Jewellery Council has recommended a built-up area criteria of around 500,000 sq meter, as against an earlier proposal of an area restriction of 10 hectares.

The bio-technology and the non-conventional energy SEZs are likely to have an area restriction of six hectares and a built-up area of 400,000 sq meter. This proposal has been mooted by the ministry for science and technology and non-conventional energy.

Officials added that the e-GoM would also take up some of the unresolved issues between the commerce and finance ministries including the definition of export or import of service to be incorporated under the SEZ rules. The finance ministry wants the definition to be changed as per the Export of Service Rules, 2005 and the Taxation of Service Rules, 2006.

The changes in the rules pertaining to the use of processing and non-processing area in the SEZs is also being referred to the e-GoM following the commerce ministry's objection to restrict the use of infrastructure in the SEZ such as residential facilities, hospital and schools to a certain percentage.

"The commerce ministry favours certain standard norms instead of a percentage being fixed for use of infrastructure in an SEZ. Any use of an infrastructure beyond the standardised norm should not be given any tax benefit," an official said.