SEZ Exports Growing In India; Rule Changes On The Horizon

by Lorys Charalambous, Tax-News.com, Cyprus

10 September 2008

In a recent statement, the Associated Chambers of Commerce and Industry of India (Assocham) welcomed the substantial export growth shown by the country's Special Economic Zones (SEZ).

The SEZ law was passed in 2005, in an attempt to liberalize the Indian economy. However, concerns expressed by various special interest groups have meant that the development of the SEZ regime over recent years has been beset by controversy.

Assocham last week acknowledged the "great controversies" surrounding the zones, but revealed that "their exports registered a substantial growth of 192% between 2005-06 to 2007-08 and in 2008-09, SEZs exports are likely to phenomenally go up to 451%".

This appears to fit with the government's perception of the success of the SEZ system, as in late August, Commerce Secretary G.K. Pillai estimated that investment in SEZs may breach INR2tn by 2009.

The trade body went on to announce last week that:

"According to ASSOCHAM estimates, as far as employment from SEZs is concerned, it has projected that by 2011-12, the SEZs in totality are expected to create direct employment opportunity for 10 million skilled (workers)."

It further observed that the zones in Northern and Eastern India (such as those in Delhi, Rajasthan, Haryana, Punjab, Orissa and West Bengal), have tended to be more successful than their counterparts in the Southern and Western regions (including SEZs in Andhra, Karnataka, Tamil Nadu, Kerala, Gujarat, Maharasthra, Goa etc), as a result of the broader "multi product SEZ" approvals granted to the former group.

Meanwhile, speaking at a recent meeting with members of the Export Council for EoUs and SEZ units, the Commerce Secretary pledged a clarification of the service tax refund rules as they relate to activities undertaken in SEZs by the end of the month, stating that:

“The Empowered Group of Ministry recently approved certain amendments of the Union SEZ Rule and the necessary notifications would be issued by September.”

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