The government is expected to announce a new Act in the forthcoming Budget 2022-23 to manage the country’s special economic zones (SEZ) in an earnest attempt to make them growth engines as well as compliant with the international trade guidelines.
It is worth mentioning in this context that the new Act or an overhaul of the existing SEZ Act is required after India lost a dispute to the US at the World Trade Organization (WTO) on these zones breaching the global pact on subsidies and countervailing measures, ET reported citing officials.
The commerce and industry ministry has pitched for a new Act for SEZs to be able to sell goods in the domestic market at low custom duty, easier exit for loss-making entities and units to be able to accept payment in Indian currency.
“We are taking all issues holistically. . . SEZ Act may be revamped or a new Act might be put in place because SEZs go against WTO rules,” the financial quoted an official as saying.
Experts are of the view that the Budget will concentrate a lot more on trade-related packages and may propose to modify the SEZ Act.
According to the financial daily, the work is underway to facilitate the process of denotifying vacant spaces of more than 100 million sq ft built-up area, worth Rs 30,000 crore, in the 250-plus SEZs in the country, Also, the ministry weighing options for partial derecognition of existing SEZs so that areas that have no more demand can be utilised for industrial or other purposes.
At present, India has 426 SEZs that have been given formal approval under the SEZ Act, 2005, and 33 SEZs with in-principle approval, according to the commerce department.
The Centre is likely to drop a clause related to foreign ex-change for SEZ units and replace it with a criterion based on investment in research and development, innovation and job creation.
A rethink at the Act comes following the Centre adopted a sunset clause and said that only those entities that started production on or before June 30, 2020, would be granted a phased income tax holiday for15 years.
“The finance ministry is keen to push their Manufacture and Other Operations in Warehouse scheme, and its overlaps with the SEZ Act are also being looked at,” the publication quoted said another official as saying.
