Major differences have cropped up between commerce and finance ministries over reforms in the Special Economic Zone (SEZ) Act.
While the commerce ministry wants to announce the revised SEZ policy,which substantially liberalises land requirement and other norms,immediately after the presidential elections,the revenue department,under the finance ministry,has opposed a majority of the proposals. It has also insisted that the commerce ministry get the approval from the Cabinet for the amendments.
Officials privy to the development said that meetings between the secretaries of commerce and revenue,SR Rao and RS Gujral respectively,held on July 7 and 8 failed to arrive at a consensus.
According to the documents accessed by The Indian Express,the new proposals aim to bring down the minimum land requirement from 1,000 hectares in case of multi-product SEZ to 250 hectares,and to 40 hectares from 100 hectares in multi-service and sector specific SEZ. Besides,the Information Technology SEZ and IT enabled service (ITeS) SEZ,the commerce ministry proposes to do away with the minimum land requirement condition but retain the minimum build-up area of one lakh square meters in case of seven category A cities,and 50,000 and 25,000 square meters for 15 category B cities and rest of the cities,respectively.
Out of the 585 SEZs approved by the Board of Approval (BoA),only 143 are operational and most of the remaining projects may not materialise primarily because of land acquisition issues. About 60 per cent of the approved SEZs are in IT or ITeS sector.
The revenue department is concerned that the relaxation of land requirement will increase the number of SEZs which besides having a revenue implication will also create administrative and logistical issues. SEZ enjoy income tax exemption for a period of 10 years along with other concessions. DoR (department of revenue) says if SEZs increases exponentially then it will be difficult to monitor their activities which could lead to large-scale tax evasion,and it does not have the manpower to depute its officials to SEZs.
The opening up of social infrastructure in NPA has been objected by DoR citing that this goes against the original objective of the SEZ and is a merely a real estate activity. Also,the department quotes statistics to suggest that since 2006-07 the export of SEZ is primarily on account of shifting business from the Export Oriented Units to SEZs.
For the year 2011-12,Rs 8,153 crore ( expected to be more after adjustments) has been forgone as revenue on export profits from SEZ units and the DoR is apprehensive about further loss if the norms are relaxed.
According to the commerce ministry proposal,the social infrastructure in the NPA maybe opened to others and in case the SEZ is located in backward location it may be allowed duty concessions.