EGoM rings in infotech party in SEZs

So, for SEZs in Tier II cities, the norm for built-up area has been lowered from one million sq ft to 500,000 sq ft. And in a Tier III towns, an IT SEZ will only need to build up 250,000 sq ft. For Tier I cities, the current norm of one million sq ft stands. All SEZs, other than for IT, will need to meet one million sq ft built-up area cut-off.

Commerce Ministry sources said that the minimum area requirement for biotech and non-conventional energy would be considered by the group in its next meeting on May 22. A decision on the minimum size requirement for the gems & jewellery sector will be taken after further discussions between the department of commerce and the department of revenue.

Commerce and Industry Minister Kamal Nath said today that further small-scale relaxations are likely in coming days, but added that the EGoM had managed to resolve all issues ‘‘by and large.’’

‘‘SEZs are to be a vehicle for investment, enlarged economic activity and lead to employment generation,’’ Nath said after the meeting ended. Later sops will be mere clarifications, he pointed out, and may deal largely with how linkages for sectors other than software and IT services are to be worked out.

Sources, however, confirmed that the Planning Commission’s view that granting SEZ status should be governed by their employment-generation ability was not accepted. Instead, the government has decided to make it easier for companies to assemble under the SEZ banner and get their breaks.

Sources said that linking SEZ status with employment disregards variable nature of employment. It would also be tough to maintain the employment requirement.

If any single large unit with a higher number of employees decides to move out of a SEZ, other companies would risk losing out on their tax sop, sources said.

The EGoM also decided to make it more explicit in the law—the SEZ Rules—that existing units in domestic tariff area would not be allowed to be converted to SEZs by shifting plant and machinery. Only new investments would qualify for SEZ benefits, although there would not be any bar on import of second-hand machinery into SEZs.

Arguing for economies of scale, the Finance Ministry had sought a minimum size of 62 acres. Its argument is that the small size would lead to significant revenue loss—one estimate says it’s Rs 70,000 crore in direct taxes—as firms would shift to the SEZs to get a tax shield.The objection raised by the Finance Ministry has put on hold decisions on about 50 SEZs.