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Govt eases land requirement norms for SEZ- 13-Aug-2013

New Delhi: The government relaxed SEZ rules concerning minimum land requirement and sale of units to make the scheme more attractive for investors.
    
A notification to give effect to the changes in the SEZ Rules was issued. To revive investors interest in special economic zones, Commerce and Industry Minister Anand Sharma had announced certain measures on April 18.
    
The package of reforms include reducing the Minimum Land Area Requirement by half for different categories of SEZs, an exit policy by allowing transfer of ownership of SEZ units including sale and doing away with minimum land requirement criteria for IT\ITES zones.
    
For multi—product SEZ, minimum land requirement has been brought down from 1,000 hectares to 500 hectares. For Sector- Specific SEZs, it has been brought down to 50 hectares. The norm was also relaxed for setting up of zones in north eastern states, hilly regions, Goa and Union Territories.
    
"These measures, we are hopeful, will lead to added investments in SEZ," Commerce Secretary S R Rao said.
    
The norm was also eased for setting up exclusive SEZs for electronics hardware and software, handicrafts and agro-based food processing zones.
    
While minimum land requirement norm has been done away with for IT\ITES SEZs, the developers would have to adhere to minimum build up area criteria.
    
The requirement of one lakh square meters will be applicable for seven major cities – Mumbai, Delhi (NCR), Chennai, Hyderabad, Bangaluru, Pune and Kolkata.
 
For the class B-cities (which are 15 including Ahmedabad and Bhubaneswar), minimum built up area would be 50,000 sq. mtrs, while for category C (all other cities) 25,000 sq. mtrs built up area norm will be applicable.
    
Flexibility to set up additional units in a sector specific SEZ has been provided by introducing 'Sectoral Broad-Banding' to encompass similar or related areas under the same sector.
    
On the issues relating to vacant land, the existing policy allows for parcels of land with pre-existing structures not in commercial use to be considered as vacant land for the purpose of notifying an SEZ.
    
It was decided that "additions" to such pre-existing structures and activities being undertaken after notification would be eligible for duty benefits similar to any other activity in the SEZ.
    
SEZ, once an attraction for investors, lost the sheen following imposition of MAT and DDT, certain provisions in the proposed direct tax regime (DTC) as well as global slowdown.
    
Exports from these zones grew by about 31 per cent year- on-year to Rs 4.76 lakh crore in 2012-13.

The Commerce Ministry said that an SEZ unit may opt out of the zone by transferring its assets and liabilities to another entity by way of transfer of ownership including sale of SEZ units subjected to conditions like prior clearance from the Approval Committee.
 
Besides, it said, the unit will be transferred to the buyer if it is "...operational for a minimum period of 2 years after the commencement of production as on the date of transfer; the transfer fulfils all eligibility criteria applicable to unit and the applicable duties and liabilities, if any, as well as export obligation".
 
Further, it also said that any addition or upgradation to existing ports, manufacturing units or structures after their addition or inclusion in a SEZ will be eligible for fiscal incentives as applicable for a new infrastructure in a SEZ.
 
"...addition or inclusion of any land to an existing SEZ, where such land contains a port, manufacturing unit or structures in which no commercial, industrial or economy activity is in progress, then such SEZ shall not be eligible for any duty benefit in respect of the pre-exiting structures...," it added.