Government eases norms for land use by SEZs

Seeking to boost India's flagging Special Economic Zones (SEZs), the government has allowed developers to carry out infrastructure-related work within the tax-free enclaves.

This covers building banks, hospitals, hotels, schools and colleges that can be even used by people residing outside the SEZs, as well as by the workers and families staying within.

However, in a notification issued by the commerce department, the government also clarified that no tax incentives will be provided for developing such commercial infrastructure, which can be built only in the non-processing area, where export activities do not take place.

''The customs duty, central excise duty, service tax, and such other central levies and tax benefits already availed for creation of such infrastructure shall be refunded by the developer in full, without interest,'' said the notification issued on Friday.

The move will entail amending the Special Economic Zones Rules, 2006.

Developers had been urging dual usage of their SEZ land since the beginning of the global financial recession in 2008, due to which a large number of projects had stopped. Developers were left deep in debt, with vast tracts going waste. With the new move, it is expected they will be able to monetise some of these portions.

The government also laid out certain conditions on utilising the SEZ land concerning refund of stamp duty or local taxes to the state government where the zone is located.

Developers will also be required to produce a no-objection certificate from the state government before developing the infrastructure, which will then require approval from the board of approval chaired by the Union commerce secretary.

Under the new norms, the area to be used only by SEZ units will be ''bonded and physically segregated from the Domestic Tariff Area''.

Meanwhile, the government recently cancelled 67 formally approved SEZs. As a result, the total number of SEZs with formal approval came down to 491 in December, of which 352 have been notified. A total of 196 SEZs are operational and are exporting.