SEZs tense over stamp duty exemption

Even as Orissa gears up for a separate special economic zone ( SEZ) policy by end October 2008, trouble continues to brew over the issue of 100 per cent exemption of stamp duty on transfer of land by government or by the state land development agency, Industrial Infrastructure Development Corporation of Orissa ( IDCO), to SEZs.

It is not yet known what plans the Centre has in maintaining or scrapping the provision of 100 per cent stamp duty exemption for lands converted to SEZs. Orissa, Madhya Pradesh and Andhra Pradesh have challenged such provisions kept in the SEZ Act, on grounds that it will make the state exchequer poorer and create problems for collection of taxes.

The draft SEZ policy prepared by Orissa includes 100 per cent exemption of stamp duty for transfer of land by government or IDCO.

This, however, has been contested by the state revenue department which has sought clarification from the Union commerce ministry on its future course of action as regards the implementation of the SEZ Act and the state SEZ policy.

Alongside, it makes all transactions relating to transfer of properties as also loan agreements, credit deeds, mortgages and hypothecation deeds executed by the SEZ units for assets within the processing zone of the SEZ 100 per cent stamp duty free. Orissa proposes to set up 13 SEZs of which 3 have already been notified and 6 has formal clearance and 4 in-principle clearance.

The state revenue secretary G V V Sharma said, “ as the state SEZ policy is still under preparation and nothing has been finalized, we have sought clarifications from the Union commerce ministry on how to go about with the issue of 100 per cent exemption of stamp duty in the SEZs.”

The state SEZ policy is being worked out on lines of the national SEZ Act to make it compatible.

The union commerce ministry has referred the issue to the union law ministry for a final review.

According to latest feedbacks, the law ministry is believed to have settled in for a concern for the states pointing out that 100 per cent stamp duty exemption cannot be given merely on the basis of the SEZ Act and that the Indian Stamp Act will have to be amended to make way for such a provision.

The Orissa draft SEZ policy points out that the developer and SEZ units in the processing zone shall only be exempted from all state and local taxes, levies and duties including stamp duty sold, local body taxes on goods and services required for authorized operations and goods and services sold in the domestic tariff area (DTA).

The exception will be for those materials procured from DTA and sold as it is. This apart, for transactions among one another, i.e. developer, SEZ units and other authorized establishments within the SEZ similar exemptions will be applicable.

This will have to be within the processing zone of the SEZ. Supply of goods and services from the DTA to SEZ will be treated as physical exports or deemed exports and benefits will therefore be given.

For goods manufactured in SEZs and sold in the DTA value added tax ( VAT) and other entry tax will be applicable along with other local taxes and levies. Moreover all sales from SEZ to DTA will have to be made in Orissa and no branch transfer shall be permitted.