Monday, May 07, 2007

It's a taxing time for SEZ areas


NEW DELHI: In a big blow to special economic zones (SEZs), states have
decided to levy taxes on goods consumed at non-processing areas in SEZs.
This will result in all supplies to non-processing areas of SESz ––
which essentially house the social infrastructure like schools,
residential premises, shopping complexes –– will attract taxes levied by
states like valued added tax (VAT), sales tax, octroi and entertainment

"The empowered committee is of the unanimous view that states should not
give any tax exemption in non-processing area of SEZs," chairman of the
Empowered Committee of state finance ministers, Asim Dasgupta, told
reporters after a meeting of the committee here on Saturday.

Till now, states had not made any distinction between processing area
where actual production takes place and non-processing area. "This would
mean that supplies like cement, steel required to build social
infrastructure in SEZs would now attract tax," said Mr L B Singhal,
director general of Export Promotion Council for EOUs and SEZs. Centre
has already decided to impose taxes on the non-processing area.

The Empowered Committee also decided to form a joint working group with
representatives of both state and central government to prepare a
roadmap for an unified goods and service tax. The working group will
give its report in four months. "GST will be a superior form for VAT. It
would bring down the tax load on goods and services. At the same time it
would be structured in the way that revenues of both centre and states
grow," Mr Dasgupta said. He said the committee would also travel to
countries which impose GST to study their models.

He said states have also decided to bring a common VAT return and audit
form. The form which will provide for some local considerations had been
prepared. a final view on its introduction would be taken after
interaction with trade and industry bodies. Giving details about VAT
revenue, he said collections of VAT implementing states in 2006-07 grew
by a 24% to Rs 86,249 crore compared to Rs 69,691 crore the previous year.

Govt to notify 100 more SEZs by March 2008

PTI[ FRIDAY, MAY 04, 2007 06:30:32 PM]

LUDHIANA: The Centre has decided to notify 100 more special economic
zones by the end of this financial year, a top commerce ministry
official said.
"By the end of this year, we would be notifying 100 more SEZs," Commerce
Secretary G K Pillai told reporters here, adding of these, 40 would be
notified by the end of May.
Pillai said the government has so far formally approved 234 SEZs with an
expected investment of Rs 3,00,000 crore. Out of these, the Centre has
notified 100 SEZs so far, he said.
"The government expects to attract an investment of Rs 1,00,000 crore in
SEZ and provide employment to five lakh people by the end of this
financial year," he said.
During the last 15 months, such zones have attracted an investment of Rs
28,000 crore and create 27,000 jobs, he said.
Pillai, who was here to attend a meeting with exporters of Punjab,
Haryana and Chandigarh, said of 11 applications from Punjab, four have
been formally approved, while the remaining have been given in-principle
Out of these four SEZs, Quark City and Ranbaxy are setting up two zones
in Mohali with an investment of Rs 4,500 crore and Rs 700 crore
"Quark city would offer employment to 35,000 people while Ranbaxy would
offer jobs to 1,200 people," he said.

SEZ rows may get special umpires



NEW DELHI: Civil courts may be barred from taking up cases related to
compensation disputes arising out of land acquisition for special
economic zones (SEZs) and other industrial and public purposes.
According to the Land Acquisition (Amendment) Bill 2007 drafted by the
rural development ministry, a Land Acquisition Compensation Disputes
Settlement Authority (LACDSA) will be created in place of courts in each
state to look into such disputes. For inter-state projects, a similar
inter-state authority has been proposed.

The draft Bill also seeks to bar state governments from acquiring land
for private players by proposing that part VII of the existing Act
dealing with acquisition for companies should be omitted. The proposal
holds significance as the empowered group of ministers (eGoM) on SEZs
had recently barred the state governments from acquiring land for
private developers only for SEZ projects. It may be noted that there
were protests not only against land acquisition by the West Bengal
government for the Nandigram SEZ but also against the Tata's Singur
project, which was a non-SEZ.

The feasibility of the proposals will be examined in details by the
group of ministers on the relief and rehabilitation (R&R) policy to be
constituted soon. The PMO wants to seek the opinion of the GoM on the
entire revised policy drafted by the rural development ministry. The R&R
policy, when approved by the government, will lay down all parameters
guiding land transactions including benchmark prices and compensation to

Laying down that land could be acquired by the government only for
public purposes, the amendment Bill defines public purpose narrowly to
include strategic purposes related to defence and any other work vital
to the state and public infrastructure such as electricity,
communication, mining, water supply and public facilities. For private
project related acquisitions, the onus would be on the companies to
acquire land directly.

However, an official source said that the new Act would allow some
flexibility to the state to acquire land for projects where about 90% of
land has already been purchased by the private developer. The draft
policy has also proposed that rehabilitation grant should be given to
displaced persons only in lieu of land or job. The proposed formula
calls for the acquirer to pay an average of the 'higher prices' paid in
50% of the land sold in the area in the previous three years. The
average pricing will be determined from land previously acquired for
industrial use

Nath not in tune with FM on SEZ forex earning rule



NEW DELHI: Determination of export obligation for units in SEZs is
proving to be a tricky issue for the government. While the eGoM on SEZs
had asked the finance and commerce ministries to examine the feasibility
of introducing an additional export obligation, the two ministries are
finding no meeting point on the issue.

The eGoM had said that in addition to the existing criteria requiring
SEZ units to be net foreign exchange earners, it should be examined
whether another obligation requiring units to export goods equal to the
value of inputs bought by them from the domestic tariff area (DTA)could
be imposed.

When an export obligation is imposed on a unit, it is committed to carry
out exports — depending on the level of obligation imposed — in return
for the various concessions. The finance ministry feels the current
export obligation requiring SEZ units to be net foreign exchange earners
is not enough to ensure adequate exports. The commerce ministry,
however, believes the net foreign exchange criteria should be enough
provided checks are introduced to rule out foul play.

Speaking to ET, commerce ministry officials said they realised the need
to prevent misuse of rules. One possible misuse could be that an SEZ
unit could set up a subsidiary in the DTA and source goods from it with
the DTA unit claiming concessions in lieu of the deemed exports made to
the SEZ unit.

To prevent such cases, the commerce ministry has suggested that in case
a DTA unit is fulfilling its export obligation by supplying goods to an
SEZ unit, the value of sales should be added to the SEZ unit's export
obligation. The finance ministry argues there could be units that are
not importing at all, and which would not have to export anything if the
export obligation is restricted to units being net foreign exchange

Number of notified SEZs cross 100

PTI[ TUESDAY, MAY 01, 2007 07:00:46 PM]

NEW DELHI: Special Economic Zones of Bajaj Auto and Ranbaxy are among
the 37 SEZs notified since the freeze was lifted on April 5, taking the
total number to 100.
"As on May 1, a total of 100 of the 234 SEZs that had received final
approval, have been notified," a senior government official said.
These include SEZs of Bajaj Auto, Ranbaxy, Mahindra and Wockhardt, he said.
The official said in the coming six months 100 more SEZs from among
those who have final approvals would be notified.
According to sources, 50 SEZs are likely to become operational by July.
At present, only 19 zones that were set up after the SEZ Act 2006 are
So far, an investment of Rs 13,435 crore has been made in the SEZs and
18,457 jobs created.
They said if all the 234 SEZs with final approval become operational by
2009, they would attract investment of Rs 3,00,000 crore and create 40
lakh jobs.
Exports by units in SEZs this year is expected to touch Rs 67,300 crore
and could cross Rs 100,000 crore by 2009.
However, this figure is likely to exceed as the applications for setting
up more SEZs continue to flow in. At the last count, more than 350
proposals were pending before the Board of Approval.
Apart from fresh applications, around 162 cases with in-principle
approvals are pending before the Board.
In its meeting next week, the BoA will consider 19 proposals with
in-principle approval for granting final clearance.

Rehabilitation policy for SEZ-displaced likely to get delayed


Rehabilitation policy for SEZ-displaced likely to get delayed

Posted online: Monday, May 07, 2007 at 0000 hours IST

NEW DELHI, MAY 6: The much-awaited policy for mandatory rehabilitation
of land owners displaced by industrial projects and SEZs might get
delayed with the matter being referred to a group of ministers (GoM).
The Resettlement and Rehabilitation Policy has been drafted by the rural
development ministry in the backdrop of protests in Nandigram and Singur
in West Bengal and Raigad in Maharashtra.

While rural development minister Raghuvansh Prasad Singh had hoped that
an early clearance from the law ministry would pave the way for the
policy to be sent to the Cabinet for approval, the decision to refer the
matter to a GoM might put a brake on its passage in the ongoing
Parliament session.

The law ministry is understood to have completed the final draft of the
rehabilitation package which comprises an amended Land Acquisition Act,
a rehabilitation policy and a rehabilitation law.

The GoM is expected to look into several critical aspects of the issue
like having an independent arrangement for out of court settlement of
small issues involved in land acquisition or having an independent
tribunal to deal with such cases.

It will also look into the proportion of land which the government can
acquire for setting up industrial projects.

After the protests, an empowered GoM on SEZs headed by external affairs
minister Pranab Mukherjee put a end to compulsory land acquisition for
these zones and also fixed a limit of 5,000 hectares on their size.
Changes in land acquisition laws are expected to put an end to
compulsory land acquisition for industrial projects.