With a view to further promote development of Special Economic Zones (SEZ) in the country, Ministry of Commerce (MoC), has initiated a two-step approach – first it reduced the minimum area requirement for setting up SEZ’s in 2014 and then at the break of 2015, permits dual use of non-processing areas allowing developers to set up social infrastructure such as schools, hospitals and hotels, which can be accessed by people from within and outside the zones. This is a step in the right direction, as it promotes creation of smart zones, where entrepreneurs will get access to world class social infrastructure, along with processing area, thereby getting the ability to attract talent.
This Alert summarizes the Notification dated 2 January 2015 issued by the Ministry of Commerce & Industries (Department of Commerce) (MoC) amending the SEZ Rules, 2006. MoC has clarified that the non-processing area in SEZs would be divided into two parts wherein the social or commercial infrastructure part can be accessed by entities/ person both within and outside the SEZ while the second part would be marked exclusively for SEZ entities/ persons. Also, no exemption or concession would be provided for creation of the infrastructure which would be used by entities/ persons both within and outside the SEZ.
Industry has for long demanded that the government permit use of social or commercial infrastructure in SEZs by people outside such zones. The formal announcement of the policy reforms for SEZs provides a breather for the SEZ sector which has been severely impacted post the dilution of tax benefits to SEZ units and SEZ developers. Developers of SEZs who have been struggling with various challenges including land aggregation issues, and declining demand for SEZ space, will effectively get a new lease of life with the policy reforms thereby increasing the overall viability of these ventures.
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