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Companies get nod to expand SEZ operations into other zone

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The Union government has allowed companies having operations in one special economic zone (SEZ) to expand operations into another one seamlessly, making these exports enclaves more attractive for investors. The SEZ policy is not clear on the expansion aspect. Hence the companies sought permission of the Board of Approval (BoA) if they wanted to set up a unit in another zone, which effectively meant a full-fledged new application. Companies can expand into another SEZ, but as a new unit and get tax benefit for the unexpired period. Sony India Software Centre, a unit in Vrindavan Tech Village SEZ, Bangalore had sought an approval to expand its production capacity into another SEZ in the nearby RMZ Ecoworld Infrastructure SEZ. The 19-member Board of Approval, headed by the commerce secretary, in its meeting on June 12 allowed Sony to expand as a fresh unit. It would have to apply for a fresh license, but the income tax benefits will only be applicable to the unexpired period, which is 7 years in this particular case. In future, companies needn't seek BoA nod to extend operations to another SEZ, a commerce department official told ET.
The policy does not allow shifting of business from domestic tarrif areas (non SEZS) to SEZs, which baffled companies over SEZ to SEZ expansion as well. "Sony was a bit apprehensive about the transfer, but in the BoA we have assured them that they can go ahead. Ultimately we need investments, so you need to ensure smooth operations for companies and not work in a straitjacket manner", said a commerce ministry official. Sony was expanding operations, but the present SEZ did not allow them do to do so, given the limited space. The official has said, that is will not be a special case, and in future companies may not even need to seek nod to expand. "In case something like this comes up again in the board of approval meeting, we will clarify that one needn't take permission to expand to another SEZ as a new unit, as it will be in accordance to the policy, the official told ET. For Sony to expand to another SEZ will also require transferring employees from the existing unit. BoA, however, observed that the "apprehensions regarding the treatment of the issue of movement of employees / contracts from its existing unit in one SEZ to the proposed new unit in the other SEZ for the purposes of exemption under Section 10AA of I-T Act need to be suitably addressed by the department of revenue in the given legal framework", the minutes of the BOA meeting said. However, PC Nambiar, chairman of the Export Promotion Council of EOUs and SEZs, said that there was no need for Sony to go for expansion but it could have very well set up a separate unit in the new SEZ and enjoyed tax benefits for the entire 15 years. In another case, Oil and Natural Gas Corp (ONGC) got permission to carry out drilling/ exploration activities in the Sterling SEZ and Infrastructure Limited at Vadodara, Gujarat, as a special case keeping in mind the national importance of the activities. Easing of SEZ norms last month, failed to impress developers, as 5 SEZs got de-notified in the the same meeting, including that of Parsvnath developers and Reliance in Gurgaon. "Some states like Haryana have announced schemes providing higher incentives compared to the SEZ policy, so obviously, the developers would like to avail it," the official said.
Source: Economic Times

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