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Department of Commerce Clarifies Policy Changes Relating to IT SEZs

11 Nov 2010

The Department of Commerce ("DoC") has issued an Instruction No. 70, dated November 9, 2010 clarifying various policy and operational issues concerning IT Special Economic Zones ("SEZs"). A meeting chaired by the Additional Secretary, Ministry of Commerce ("MoC") was held on November 2, 2010 with Director STPIs in respect of IT SEZs. Based on the discussions held and the decisions taken thereof, the MoC has issued some important clarifications on policy and operational issues relating to IT SEZs. Taxand India summarise the various policy clarifications issued by the MoC.


Taxand's Take

The Instruction issued by the MoC concerning various policy and operational issues of IT SEZs is a positive development given the recent complexities being faced by previously approved units and proposed units due to the stand taken by a few DCs/UACs.

The Commerce Ministry had last month clarified once again that there were no restrictions whatsoever for units proposing to migrate from DTA or STPI unit to SEZ unit, other than the non-availability of Income tax exemption when the transfer of used capital goods exceeds the 20 percent threshold. However there were apprehensions whether it would put to rest the larger controversy surrounding transfer of existing operations and not just capital goods.

Instruction 70 explicitly brings in the much required clarity on this matter suggesting there is no restriction whatsoever on transfer of - used capital goods, business and manpower from DTA or STPI unit to a SEZ. The clarification on "new investment" in context of investment in infrastructure development in the SEZ is significant given earlier the DCs were rejecting unit applications on the ground that shifting of units was identical to "no new" investment in the zone. Other clarifications for IT SEZs on areas of broad banding, DTA sale, etc are positive and will help improve the operations of the IT SEZs.

To read the Instruction, please click here Read the full report from Taxand India here

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Your Taxand contact for further queries is:
Bobby Parikh
T. +91 22 3021 7010

Taxand's Take Author