IT cos working on SEZ proposal at Siruseri

Rope in Pricewaterhouse Coopers to prepare concept report

A group of information technology companies is working on a plan that envisages getting a part of the industrial park in Siruseri converted into a Special Economic Zone (SEZ), motivated primarily by the tax benefits available to units located in an SEZ.

The group expects to finish the proposal in three weeks and submit it to the State Industries Promotion Corporation of Tamil Nadu (Sipcot), the nodal agency for the industrial park that is located about 30 kilometres from the airport.

Sipcot, in turn, would have to route the proposal through the proper channel to the central government, said R Rajagopalan, vice-president (Finance and Administration) at Cognizant Technology, one of the IT companies in the group. The SEZ plan is still at an early stage, he added.

The group, that is made up of about a dozen companies, is working on the proposal with the help of Pricewaterhouse Coopers (PwC). The other key members of the group are Tata Consultancy Services, Polaris, Patni Computer Systems, Hexaware, Xansa and Syntel.

PwC was roped in to prepare a concept report for the SEZ plan. The group's effort has received the backing of the Confederation of Indian Industry (CII).

The move to convert a part of the Siruseri park into an SEZ faces many challenges. The key challenges relate to the provision of infrastructure to qualify for SEZ status.

The area taken by the IT companies covers about 350 acres. Rajagopalan said that one of the SEZ conditions is that the proposed area has to be secured by a compound wall.

Some villages adjacent to the park have been given the right to use parts of the park as access roads; one kind of challenge the proposal has to deal with.

The infrastructure within the park would have to be improved to reach SEZ standard.

This may eventually require a Special Purpose Vehicle (SPV) to help put in place the infrastructure.

Rajagopalan said that the immediate aim was to get an in-principle approval for the SEZ and follow that with a detailed project report to deal with infrastructure- related shortcomings.

Tax benefit main driver

IT companies' main benefit in locating themselves in an SEZ would be tax breaks.

Companies would qualify for 100 per cent tax exemptions for the first five years. This would be followed by 50 per cent exemption for the next five years and 50 per cent of the ploughed back export profits for the next five years.

Benefits on indirect taxes could also be significant. For example, service tax paid to recruitment agencies would not be applicable for a unit in an SEZ.