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A file photo of commerce minister Anand Sharma. Photo: Ramesh Pathania/Mint (Ramesh Pathania/Mint)
A file photo of commerce minister Anand Sharma. Photo: Ramesh Pathania/Mint
(Ramesh Pathania/Mint)

Government eases land norms for SEZs

Minimum land required for multi-product SEZs cut to 500 hectares and for sector-specific ones to 50 hectares

New Delhi: The government on Tuesday notified amendments to make special economic zones (SEZs) more attractive, as it tries to boost exports to narrow the widening current account deficit.

The commerce ministry notification comes amid a slew of other measures announced by the finance ministry on Monday and Tuesday to reduce imports and attract capital flows.

In its notification, the commerce ministry has reduced the minimum land area requirement by half for multi-product and sector-specific SEZs. While the minimum land area requirement for multi-product SEZs has been reduced to 500 hectares (ha) from 1,000 ha, for sector-specific SEZs this has been halved to 50 ha. There will be no minimum area requirement for setting up of SEZs by information technology firms. They will, however, have to adhere to minimum built-up area requirements varying from 25,000 sq. m to 100,000 sq. m, depending on the location of the SEZ.

The revised rules should help in reviving interest in SEZs and boost exports, according to Samir Kanabar, tax partner at EY, a consultancy earlier known as Ernst and Young.

“There have been many applications that have been pending with the board of approval for rescaling operations because of issues around contiguity of land," Kanabar said.

The ministry has also made it easier for entities to exit from SEZs. The amendments will enable the units to transfer assets to another entity, subject to certain conditions. The unit should have been operational for a minimum period of two years and the entire duties and liabilities will have to be transferred to the acquiring entity. The new rules also allow an area with existing structures to be included in an SEZ.

Commerce minister Anand Sharma had announced some of these relaxations in April but they have been notified only now. The amendment has also made a provision for setting up SEZs for agri-food processing units with a minimum land requirement of 10 ha.

SEZs lost their edge after the finance ministry imposed a minimum alternate tax of 18.5% on SEZ developers and units and a dividend distribution tax of 15% on developers. But the government has been taking steps to narrow the trade deficit to improve the balance of payments situation. Earlier this month, the commerce ministry announced 2,000 crore to revive India’s exports, including an additional 1% interest subsidy to exporters and an export development fund.

India’s exports were up 11.64% to $25.8 billion in July after contracting for two consecutive months while imports shrank 6.2% to $38.1 billion.

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