GST incentivises investments in SEZs: Official

The roll-out of the Goods and Services Tax (GST) from July 1 has increased the investment attractiveness of Indian special economic zones (SEZs), while the government plans to expand these to smaller cities, a senior official said on Wednesday.

"After 2011, today again probably is the right moment to make investments in the SEZs, as it is the only scheme, among the many export promotion schemes in India, wherein ab initio exemption has been provided from customs duty as well as IGST (Integrated Goods and Service Tax)," Noida SEZ Development Commissioner L.B. Singhal said at an industry chamber Assocham event here.

"So, this being the only export promotion scheme, this is a real major incentive for making an investment for manufacturing and services in the SEZs," Singhal, who has 27 SEZs under his jurisdiction employing over 81,000 people, said.

He said the benefits which were provided under the Foreign Trade Policy under various export promotion schemes like focus product scheme and focus market scheme have now all been merged into the MEIS (Merchandise Exports from India Scheme) and available to SEZs.

"These benefits are now also available for exports from SEZs - benefits from MEIS as well as services exporters are also entitled for the benefit of Service Exports from India Scheme (SEIS)," Singhal said.

"These reasons put together make it a attractive proposition for making investment in the SEZs," he added.

He also said the package for SEZs in India is quite comprehensive, including indirect exemptions on raw materials, indirect exemptions on capital goods, as well as tax exemptions for setting steel and cement units, among others.

He noted that while the SEZ Act provides income tax exemption on profit on exports for 15 years, a sunset clause has now been introduced that this tax exemption will be available only to SEZ units which start operating by March 2020.

"In case you are able to make investments and are able to make your SEZ unit operational by March 2020, then you will get the complete income tax exemption for 15 years which is envisaged in the SEZ Act," he said.

According to Singhal, the government plans to expand the scope of SEZs.

"Earlier area requirement for setting up a multi-product SEZ was 1,000 hectares, which has been reduced to 500 hectares. For sector-specific, it has been reduced to 100 hectares and for IT sector which was earlier 10 hectares has now been completely done away with and what you require is only 1 lakh sq. meter built-up space," he said.

The government intends to promote SEZ investment in the tier II and III cities.

"So the minimum area requirement for tier II cities is 50,000 square meters, while for tier III cities it is just 25,000 square meters," he said.

As a result, IT sector SEZs have come up in Chandigarh, Lucknow, Indore and other such cities in the last 2-3 years, the official noted.

--IANS

bc/rn