Commerce Minister for giving SEZ, an infrastructure status

New Delhi: Even as the RBI has equated Special Economic Zones (SEZs) with real estate to caution banks against their unsecured exposures to these export enclaves, the Union Commerce and Industry Minister, Mr Kamal Nath, said that SEZs should be equated with infrastructure projects for investment requirements.

Taking part in an interactive session with SEZ units and developers as also export-oriented units (EOUs) here, organised by the Export Promotion Council for EOUs and SEZ units (EPCES), Mr Nath said that SEZs should be treated as infrastructure projects. The Minister said that his Ministry would pursue with RBI to ensure that SEZs were treated as infrastructure projects.

Mr Nath underscored the need for coordinated efforts by all the stakeholders so that the SEZ scheme could fulfil the objectives and could be implemented efficiently by the State Governments by providing single window clearances and other promised benefits.

He recalled that when the SEZ scheme began, there was the fear of unknown. But the SEZ, specifically the new ones, which had come in the last 18 months, had performed exceedingly well on the export front, employment and new infrastructure. Once all the 366 formally approved SEZs become operational, four million additional jobs would be created and the country’s manufacturing sector would get a shot in the arm.

Mr Nath said that his Ministry was aware of the need for extending relief package announced on account of rupee appreciation to EOUs as well and promised that guidelines on payment of interest on delayed reimbursement of Central Sales Tax (CST) for supply of goods to EOUs would be finalised soon.

The EPCES Chairman, Mr T.Vasu, said the EOU scheme had performed well in the last 25 years and this should be nurtured along with SEZ scheme. He said the income-tax benefit available up to March 31, 2009 must be extended further and the sunset clause must be removed.

While concurring with this view, the Minister said that he would take up the matter with the Prime Minister for the removal of sunset clause under Section 10B of the Income Tax Act. He also agreed with the Council Director General, Mr L.B. Singhal, that SEZ units and SEZ developers must be extended exemption from service tax and said this issue would get resolved soon after his meeting with the Finance Ministry.

Mr Singhal said that the provisions of Section 10AA of the Income Tax Act need to be clarified because this section provides exemption from export profit as derived based on the ratio of export of the SEZ units with the total turnover of the assessee.

He said that in this formula, two different areas are being compared and that the export turnover and the total turnover for the purpose of Sec 10AA should be of the undertaking located in a specified SEZ. The Minister said that he would take this up with the Finance Ministry for necessary clarification. It was also pleaded by SEZ units/developers that the goods which are procured from the domestic market on payment of duty should be entitled for refund of duties and some mechanism for refund of duties should be put in place.