NASSCOM welcomes foreign trade policy thrust on changes in SEZ rules

by CXOtoday News Desk    Apr 18, 2013

Som Mittal

The National Association of Software and Service Companies (NASSCOM) today welcomed the annual supplement to the Foreign Trade Policy that aims at enhancing exports and easing export procedures.

NASSCOM has been working closely with the Ministry of Commerce to identify specific requirements in the SEZ policy to make it more effective for the IT-BPM sector.

“We are delighted that the government recognizes IT exports as a key growth driver for India’s exports and the SEZ scheme. Removing the minimum land requirement and reducing the built up area will enable the SEZ scheme to realise its true potential,” said Som Mittal, President, NASSCOM.

Large mandatory land requirements made it difficult for small companies to take advantage of the SEZ policy. Waiving away land requirement and reducing minimum built up area will now make it feasible for IT SEZs to come up in Tier II/Tier III locations. These changes are likely to make the SEZ policy more inclusive by attracting SMEs to consider their options.

In the absence of a clear exit policy, several SEZ units have found it difficult to exit their current operations and some of their facilities have been lying unused, with locked in capital and unutilized equipments. The proposal to include an exit policy is a welcome step and NASSCOM is grateful that some operational difficulties highlighted during the consultation meetings with the Ministry have been addressed. Work remains in detailing the exit process and NASSCOM will continue to interact with the Ministry to ensure that the details are simple and easy to follow.

The policy also extended the facility to work from home to STPI/EOUs etc in order to facilitate IT exports. While this will offer greater flexibility, there are difficulties in its implementation arising out of security requirements like PPVPN as per DoT guidelines.

NASSCOM will work with the government to ensure that ‘work-from-home’ facility is indeed available and operationalised by companies, when needed.

“We hope that Ministry of Finance will consider removal of Minimum Alternate Tax so that SMEs can truly benefit from this scheme,” said Mittal.

Policy Highlights

IT Exports constitute a very significant part of India’s exports and IT SEZs have a major contribution in it. Exports from IT SEZs during financial year 2012-13 have exceeded Rs 1.40 lakh crore (approximately $28 billion) registering a growth of over 70 percent over the previous year’s exports.

The present requirement of 10 hectares of minimum land area has been done away with. Now there would be no minimum land requirement for setting up an IT/ITeS SEZ. Only the minimum built up area criteria would be required to be met by the SEZ developers.

The minimum built up area requirement has also been considerably relaxed with the requirement of one lakh square meters to be applicable for the 7 major cities: Mumbai, Delhi (NCR), Chennai, Hyderabad, Bangalore, Pune and Kolkata. For the other Category B cities 50,000 square meters and for remaining cities only 25,000 square meters built up area norm will be applicable.

The present SEZ Framework does not include an Exit Policy for the units and feedback was that this was perceived as a great disadvantage. It has now been decided to permit transfer of ownership of SEZ units, including sale

In order to facilitate IT exports, we have extended the facility of ‘work from home’ to STPI / EOUs / BTPs / EHTPs.