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June 8, 2006
Did
you miss the SEZ bound train?
Pursuant
to our Special Economic Zone ("SEZ") hotline dated June
1, 2006, pertaining to the proposal for availability of SEZ benefits
to Software Technology Park ("STP") units, certain developments
have taken place in the SEZ saga with the recent meeting on June
6, 2006 of the Empowered Group of Ministers ("eGoM") on
SEZ.
In consideration of the Finance Ministry's concern that SEZs will
promote the proliferation of existing industrial units to relocate
to an SEZ to avail of the tax benefits, the eGoM has decided
to cap the number of clearances for the new SEZs at 150 during
the first six months after the notification of the SEZ Act on
February 10, 2006. The eGOM would review the situation once
the clearances reach 150 to see whether further clearances can
be allowed. Currently there are 69 SEZs that have already been
cleared by the Board of Approval ("BoA"). Further, the
eGoM has decided against relaxing any labor laws in SEZs. However,
there has been no indication as to the decision on issues with
regard to the extension of the SEZ tax benefits to STP units.
After
deliberations on various issues including the suggestions by the
Finance Ministry, the eGoM has finally restored the minimum area
requirement at 10 hectares for Information Technology ("IT"),
Gems and Jewellery and Biotech SEZs reversing its earlier decision
to completely remove such ceiling. Further the eGoM has also decided
to reduce the minimum processing area for multi-product SEZs from
50% to 35% and has retained the minimum area requirement at 1,000
hectares for such SEZs. "Processing area", for the purpose of
manufacturing sector, has been defined as manufacturing facilities,
through which goods produced are to be exported from the SEZ and
in the case of the service sector, it would mean facilities from
where such services are exported.
Recently,
the Government has released certain statistics, which indicate
that the 15 existing and functional SEZs have brought in private
investments of approximately USD 490 million and provided employment
to 110,000 persons.
In
the light of the above statistics, it is certain that the SEZ
express is ready to take off, once the initial issues are resolved.
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