Although SEZs have played a pivotal role in contributing to India’s economic growth, they have not reached the level of success that was envisaged. In fact, the interest of business community in SEZs slowed down over the years owing to imposition of Minimum Alternate Tax (MAT) and the introduction of sunset clause for withdrawal of direct tax benefits. The COVID-19 pandemic led to further reduction in SEZ activities, wherein Companies have been planning to move out of the SEZ. While Government tried to address such situations by bringing restrictions on work from home policies & other facilitation measures, the impact had not been very encouraging for Developers.
This notification of 6th December 2023 appears to be a welcome move in this direction. The proposed amendment would bring in the much-awaited relief to Real estate developers as well as to companies, who can now operate as DTA units in a same zone & need not move out of the premises. The Government has amended the SEZ rules to allow demarcation of a portion of the built-up area in an IT/ITeS SEZ as a non-processing area, subject to conditions including repayment of tax concessions attributable to the area. The non-processing area may be used for setting up operations of businesses engaged in IT/ITES, on such terms and conditions as may be specified by the Board of Approval. This means that the vacant floors in the SEZs which are not being fully occupied due to the hybrid work model, can now be unlocked by the SEZ Developers.
Highlights & conditions of the said rule are:
Therefore, it would be useful if clear guidelines / FAQs are rolled out on the process related matters quickly, so that practical issues and concerns surrounding it are clarified and the positive intent of the Government in boosting the real estate sector, is fulfilled in true spirit.
A version of this article was published on Dec 11, 2023 by Financial Express Online.
While the intent of change seems to be positive, there are several open questions / grey areas which need to be deliberated and resolved, such as:
Therefore, it would be useful if clear guidelines / FAQs are rolled out on the process related matters quickly, so that practical issues and concerns surrounding it are clarified and the positive intent of the Government in boosting the real estate sector, is fulfilled in true spirit.
A version of this article was published on Dec 11, 2023 by Financial Express Online.