Govt approves denotification of Dr Reddy's SEZ in Andhra

The government has approved the denotification of Dr Reddy's Lab Special Economic Zone in Andhra Pradesh.

A decision in this regard was taken by the inter-ministerial Board of Approval (BoA) chaired by Commerce Secretary Rahul Khullar on November 28.

"After deliberations, the board decided to approve the request of Dr Reddy's Lab Ltd for de-notification of the sector-specific SEZ for pharmaceuticals... Subject to the Development Commissioner's certificate that the developer has refunded all the tax/duty benefits availed under SEZ Act/Rules," the minutes of the BoA meeting said.

The developer had requested to surrender its SEZ due to change of plans by the management for implementation of expansion projects.

"The management has decided to use the land for purpose other than SEZ, i.e. Biopharmaceuticals in domestic tariff area," the developer had said in its application. The zone was planned in an area of 103 hectares.

The BoA also approved the de-notification of three more tax-free enclaves, including City Gold Realties Private Ltd and Tech Park Pvt Ltd.

While some asked for de-notification of their SEZs due to a change in their business plans, others have cited reasons such as the imposition of Minimum Alternative Tax.

The board also deferred a decision on South Korean steel major Posco's request for allowing more time to set up a multi-product SEZ in Orissa till the Board of Approval's next meeting.

Exports from SEZs grew 26.2% year-on-year to Rs 1.76 lakh crore during April-September this fiscal.

Out of 381 notified zones, 148 are operational. The maximum number of them are in sectors such as IT/ITES, engineering, electronics, hardware and textiles.

SEZs and export-oriented units (EoUs) contributed 34% to the country's export shipments in 2010-11.

However, in the wake uncertainties over tax incentives, scores of SEZ developers were given more time to execute their projects and some of them have surrendered them.

The draft Direct Taxes Code, which is to replace the Income Tax Act, has proposed withdrawal of exemptions for new units.

In this backdrop,the Commerce Ministry has floated a discussion paper to revamp the policy.