All that you need to know about SEZs
The finance minister announced several provisions in Budget 2014 that were largely aimed at promoting affordable housing development, stimulating housing demand and addressing the liquidity crunch prevailing in the sector.
Following the implementation of the SEZ Act, 2005, setting up of SEZs became the hottest trend in the Indian economy due to the cost and revenue benefits they offered. To reap these benefits, a large number of developers applied for SEZ approvals. Touted as engines of growth, SEZs created quite a stir in India in 2006 and 2007. However, post-2007 there has been a significant decline in the interest in development of SEZs.
After a head start in 2006-07, there has been a significant dip in the number of SEZs being notified for operations. The phenomenon of denotification has been constant from 2009 onwards with many leading SEZ developers exiting the market.
Developers claimed that the l iquidity crunch, reduced tax benefits due t o i mposition of Dividend Distribution Tax (DDT) and Minimum Alternate Tax (MAT), and constant changes to the fiscal policy governing SEZs are major reasons for their inability to execute their SEZ plans.
Of the 566 applications that received approvals to set up SEZs, only 185 are currently operational across the country. Some developers have even requested the government to de-notify their SEZs, others have asked it to reduce the notified land area and the rest are still undecided.
Amendments to SEZ Act, 2005
Most recent amendments to the SEZ Act 2005 were in 2013 and are as follows:
Minimum land requirement for setting up the SEZ:
500 hectares for multi-sector SEZs instead of 1,000 hectares earlier 50 hectares for sector-specific
instead of 100 hectares earlier Requirements for special category states etc. have accordingly been reduced further A new ‘agro-based food processing’ sector was introduced; would require a minimum land area requirement of 10 hectares
Graded scale development introduced for utilising land parcels between 100 to 450 hectares for SEZ development; a new sector will be allowed in an SEZ per development of additional 50 hectares of contiguous land Any additions to already existing structures (not in commercial use before SEZ development) and all the construction activities being undertaken after notification of a parcel of land for SEZ development would be eligible for benefits as per the SEZ Act Minimum land requirement of 10 hectares for IT/ITeS SEZs in earlier policy replaced with builtup area (BUA) requirement as follows:
100,000 sqm for the seven major cities including Bengaluru, Chennai, Delhi (NCR), Hyderabad, Kolkata, Mumbai and Pune
50,000 sqm for category B cities 25,000 sqm for other cities To prevent misuse of de-notified parcels of land, consideration of those proposals which satisfy the following criteria:
All proposals must have an unambiguous NOCcertificate’ from state governments State governments may also ensure that such de-notified parcels would be utilised for creation of infrastructure to subserve the objective of the SEZ as originally envisaged Such land parcels after denotification will conform to land- use guidelines/ master plans of the respective states.