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Tuesday, May 10, 2005

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No special provisions on labour flexibility for SEZs — Govt introduces Bill in Lok Sabha

Our Bureau

New Delhi , May 9

THE Government today introduced in the Lok Sabha the Special Economic Zones Bill, 2005, which provides for a stable and long-term fiscal policy framework with minimum regulatory intervention for such zones. It also provides for a single-window clearance mechanism for the establishment of SEZs.

The Bill, introduced by the Union Commerce and Industry Minister, Mr Kamal Nath, states that the objectives of SEZs include making available goods and services free of taxes and duties, bolstered by integrated infrastructure for export production and a package of incentives to attract foreign and domestic investments for promoting export-led growth.

The Bill is silent on conferring powers to the Development Commissioners for allowing flexible labour policies in SEZ units.

It empowers the Union Government to specify an officer or agency for carrying out surveys or inspections to verify or ensure compliance with the provisions of the Central Act by a developer or an entrepreneur. These Government authorised officers might carry out investigation, inspection, search or seizure in the SEZs or units without prior intimation or approval of the Development Commissioner.

Further, the Bill provides that SEZs could also take the form of port, airport, inland container depot, land station and land customs stations, as the case may be, under Section 7 of the Customs Act.

The Bill also confers power upon the Union Government to approve the setting up of an International Financial Services Centre in a SEZ. The Government would come out with rules that would specify the requirements for setting up such centres.

As regards income-tax exemptions, the Bill provides for tax concession for 15 years in respect of newly established SEZ units that begin to manufacture or produce articles or provide services during the previous year relevant to any assessment year commencing on or after April 1, 2006.

Under this dispensation, units would be eligible for 100 per cent tax exemption for 5 years, 50 per cent for the next five years and 50 per cent of the ploughed back export profits for the next five years (in all 15 years). The Bill also proposes to grant exemption of capital gains on transfer of assets in the case of shifting of industrial undertaking from urban area or any other area to a SEZ on the lines of Section 54G of the Income-Tax Act.

Further, it provides that the provisions of minimum alternate tax (Section 115 JB of the Income-Tax Act) would not apply to the income accrued or arising from any business carried on, or services rendered, by an entrepreneur or developer, in a unit or a SEZ.

As regards offshore banking units (OBUs), the Bill proposes to allow deductions in respect of certain income of OBUs and International Financial Services Centre broadly on the lines of existing Section 80 LA of the Income-Tax Act.

It also stipulates a separate authority for every approved SEZ. While providing for designated courts to try all suits of a civil nature arising in the SEZ, the Bill stipulates that any person aggrieved by the designated court, might file an appeal to the High Court within 60 days from the date of communication. It also spells provisions pertaining to offences by companies within the SEZs.

Kamal Nath for `India-specific' model

NEW DELHI: The Minister of Commerce and Industry, Mr Kamal Nath, said on Monday that the country needs an "India-specific SEZ model" instead of adopting the model followed by any other country. He added that India is "specifically" looking at regional trading agreements (RTAs) with a view to expanding its economic engagement.

"India must engage in trade on regional basis. RTAs are crucial for the growth of our economy. We must keep the engagement on," he said. However, there was need to carry out an impact assessment and added that rules of origin under these RTAs were needed to be framed carefully keeping the specificity of the situation.

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