Categorise SEZs as infrastructure, suggests policy panel

MUMBAI: The Special Economic Zone (SEZ) policy review committee commissioned by the ministry of commerce has recommended categorising the special economic zones as infrastructure to allow developers seek alternative financing options.
The committee headed by Bharat Forge’s Baba Kalyani, also sought extension of the sunset date from current March 2020 for the service sector and suggested that the benefit of existing income tax exemption on their export proceeds be continued, said two persons with direct knowledge of the development.

The committee formed in June 2018 had Arun Misra, managing director of Tata Steel SEZ; Ravindra Sannareddy, MD, Sri City SEZ; Neel Raheja, group president of K Raheja Corp; Anita Arjundas, former MD of Mahindras Lifespace Developers; Shrikant Badiga, MD of Hyderabad-based Phoenix Group and principal secretaries of state governments of Gujarat, Maharashtra, Telangana, Andhra Pradesh, Tamil Nadu and Karnataka.

Information Technology SEZs account for 28-30% of the total exports of the country and has attracted large investments from several global and domestic institutional investors.

The committee suggested the SEZ policy be redefined to 3E policy with focus on employment, export & economic activity.

Broad-banding of activities into two categories including — manufacturing product-specific enclaves and services that cover all services such as IT, financial, legal, tourism, advisory, medical under the Central GST Act.

It has suggested that the policy framework be drafted separately for the manufacturing industry and the services sector.

As services are not impacted by adverse provisions of trade agreements under WTO, the committee suggested the existing benefit for income tax exemption on export proceeds be continued for them.

Relaxation of regulations for manufacturing enclaves to enable capacity utilisation for domestic purposes, flexibility of non-processing area usage for providing social infrastructure with removal of existing limits and also for enabling setting up of domestic units considering the focus on employment creation are other recommendations made by the committee. The committee was formed to evaluate the SEZ policy and recommend measures to cater to needs of exporters in the present economic scenario. The objective was also to make a comparative analysis of the SEZ scheme and dovetail policy with other similar schemes and to make policy compatible with WTO and suggest the course in correction of policy.

The committee also suggested provision of external infrastructure by government, including SEZ’s connectivity to airports, ports & railway terminals and laying of access roads to national & state Highways, power & water supply and waste disposal systems.

The committee has stressed on implementation of Single Window Mechanism that was defunct in the previous SEZ regime, exemption from the ministry of environment and forests approval for non-polluting industries (IT/ITES) and projects with green building pre-certification.

To reduce paperwork and improve ease of doing business, the committee suggested integration of government electronic systems including GSTN, SEZ On-line and ICE-GATE (customs); that would enable expeditious transactions.

An alternate mechanism for arbitration and disposal of civil cases and notified offences of the enclaves that would reduce time delays in issuing orders and pronouncing judgements, is also a key suggestion by the committee.