By Dr Suvrokamal Dutta
Good news for Special Economic Zones (SEZ) developers, it has come into the notice of The India Street that very soon they will be allowed to transfer used plant and machinery of up to 20 per cent of their total capital goods requirement to SEZ they set up.
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When The India Street asked a commerce ministry official in this regard, he said that ministry would be sending the proposed change in the rules to the law ministry for its clearance. It is worth mentioning in this regard that the proposal was originally introduced in the Income Tax Act in the 2007-08 Budget.
The main aim of the present rules prohibiting the use of old equipment in SEZs was to motivate fresh investment and ensure that units did not misuse the tax breaks allowed in SEZs by just relocating units.
To counter this scenario, the commerce ministry had modify the Special Economic Zone Rules last year, prohibiting the use of plant and machinery in SEZs that was previously used in domestic tariff areas.
SEZ industry executives are quite pleased with the government proposal, saying it will bring lots of advantages in the long run, especially to the Infotech and IT-enabled service and high-end engineering businesses.
Theoretically speaking, plenty of companies are interested in bringing expensive and custom-made equipment, including high-capacity servers and local area networks, to new units in Special Economic Zones. In my opinion, there is a genuine requirement in certain sectors to transfer some old equipment to the SEZ units. The pivotal factor here is that the relaxation would not lead to misuse since the permissible percentage of second-hand capital goods is not big.
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