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Rules in place to help SEZs bloom

New Delhi, Feb. 9: The government today announced the long-awaited special economic zone rules that are expected to attract Rs 100,000 crore investment and generate 5 lakh jobs in the next three years.

The new rules offer single-window clearance and income tax exemptions for 15 years to investors.

The rules, which were approved by Parliament nine months ago, will become operational from tomorrow and are expected to provide a major incentive to foreign direct investment (FDI) and help boost the country’s exports.

Commerce minister Kamal Nath said, “Tax exemptions and fiscal incentives are clearly spelt out in the SEZ act and rules and any change in them could only be done through an approval of Parliament.”

He said the rules provide for up to 100 per cent sale of SEZ products in domestic tariff areas after payment of customs duty.

With the rules in place, Nath said many large and multi-product SEZs, which were unable to achieve financial closure till now, will now move forward quickly.

As many as 117 SEZs have been approved, he said. Of this, 51 have been given final approval, while the rest have received an in-principle clearance, he added. The SEZs have been based on the Chinese model of attracting FDI and boosting exports.

“It is anticipated that this will trigger a large flow of foreign and domestic investment in SEZs, in infrastructure and productive capacity, leading to a generation of additional economic activity and jobs,” Nath said.

The minister said there would be total income tax exemption for the first five years for units operating in SEZs. It will be 50 per cent during the next five years and in the subsequent five years, the tax exemption will be on 50 per cent of profits ploughed back.

Nath made it clear that the units in a SEZ will also be exempted from payment of dividend and minimum alternate tax for 10 years.

He said the SEZ act did not provide for any liberalised labour law. It has been left entirely to state governments to decide on how much flexibility they want to give.

Apart from providing a stable policy regime, the SEZs are expected to attract large foreign investment, with exports from the zones projected at $5 billion this fiscal.

Nath said multi-product SEZs should have a minimum area of 1,000 hectares, while services SEZs should at least have 200 hectares.

For gems and jewellery, information technology, renewable energy, bio-tech and other sector-specific zones, the minimum area is 10 hectares.

In case of the north-eastern states, Jammu and Kashmir and Union Territories, the rules have been relaxed and multi-product SEZs can come up on 200 hectares, while sector-specific zones on 50 hectares.

The rules provide for setting up of overseas banking units, which will be guided by the Reserve Bank regulations.

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