Law and Practice relating to Special Economic Zones.

Aggarwal, Rashmi Kumar

Law and Practice relating to Special Economic Zones

Hitender Mehta

Tan Prints (India) Pvt. Ltd., 2007

ISBN: 978-81-7496-987-3

Price: Rs. 1625

"The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregards the first lesson of economics."

Thomas Sowell

The Concept of SEZs, is contrary to belief, not new in India. Rather, India was the first nation in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in 1965. There were some major impediments which were experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime in these zones. Hence, with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000. The main objectives of the SEZ Act are: generation of additional economic activity, promotion of exports of goods and services, promotion of investment from domestic and foreign sources, creation of employment opportunities and development of infrastructure facilities. Owing to the fact that it incorporated multi-variate novelty with respect to its concept, it lacked fundamental clarity for the corporate and legal sorority. There was much need for a book which could provide consistent, cohesive and coherent understanding of the SEZs.

This book is a commentary on Special Economic Zone Act and Rules. It is a rather compelling attempt by the author to understand the concept of SEZs as an engine for economic growth supported by quality infrastructure, complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations.

The book has been divided into eleven divisions. Each division is an attempt to deal separately with different aspects of SEZs. Division one, is an introduction and commentary on SEZ Act, 2005. It is styled in the same sequence as the framework of the Act. Each section is given in verbatim from the Act, followed by expert comments from the writer. At times, these comments are a critique to the section being transitive. For example comments on Section 7 at page 1.49 are a review on this section. The author is very categorical in mentioning that provisions relating to 'Exemptions from Taxes, Duties or Cess' does not befit the title of Chapter II "Establishment of Special Economic Zone", where it has been included. He supports his argument by mentioning that there exists a separate Chapter VI relating to "Special Fiscal Provisions for Special Economic Zones", wherein the provisions relating to 'Exemptions from Taxes, Duties or Cess could have very well been incorporated.

Division two deals with the practical issues and the key sectors of SEZs. It covers the vital topics like formation of SEZs, labour laws under SEZs, besides coverage of few special areas for prime sectors like petroleum, chemicals and petrochemical investment regions. The background supporting the special incentive package scheme for semi- conductor fabrication and other macro and nano technology manufacturing industries in India (including for units in SEZs) have very exhaustively and well explained by the author.

The division three annexes statutory provisions of SEZs. It includes Special Economic Zones Act, 2005, rules, Notifications issued by Ministry of Commerce and Industry, Instructions issued by Ministry of Commerce and Industry, Department of Commerce, Notifications issued by Ministry of Environment and Forests, Formal, approvals granted after coming into force of Special Economic Zones Act, 2005- Statement list, In principle approvals granted after coming into force of Special Economic Zones Act, 2005, List of Special Economic Zones notified after coming into force of SEZs, 2005.

Division four is very relevant for understanding the applicability of the Income Tax provisions in SEZs. It gives a cohesive understanding of the tax incidence for the SEZs and their operations.

Division five to nine covers the customs provisions, Central Excise provisions, wherein concept of 'manufacture under Central Excise Act' is very extensively covered. These divisions also cover service tax provisions and state wise positions on VAT. The provisions on exemptions from stamp duty also dealt with minor details in this division.

Division ten unfolds another very important facet of SEZs, the Foreign Exchange Management Act, 1999 perspective, which was enacted with the dual objective of facilitating external trade, payments and for promoting the orderly development and maintenance of foreign exchange market in India. The principle of harmonious constructions for the interpretation of legislative intent behind these provisions wherein notifications concerning units in SEZs to simplify procedural requirements with respect to transactions in SEZs vis-a-vis their applications in SEZ, has been explained in very comprehensible flow.

Division eleven is yet another imperative part of this book, wherein the relevant provisions of Companies Act, 1956 have been incorporated. Special mentioning of the cases where passing of special resolution by the Company and the prior approval of Central Government is required. Scope of Notification GSR NO. 565(E), provisions on appointment of Non Residents as Managing Director/Whole time Director has been well explained.

Division twelve details out the State Government policies on SEZs, by first annexing the Model State Policy on SEZs and Model State SEZ Act, and then drawing a comparative study between SEZ policies of different States. The states which are included in this division are Andhra Pradesh, Chandigarh, Goa, Gujarat, Haryana, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, West Bengal. This division also deliberates on policy frame work, labour laws frame work, exemptions from levy of tax on the entertainments held within the Special Economic Zones, concessions in stamp duty and registration fees, compliances for environmental clearance, and other statuary strategies of SEZs.

The book tends to impart overall understanding of the SEZs which is very pertinent and constructive information for all the entrepreneurs planning to start their businesses in these zones. It is hence highly recommended for those who seek a commentary clarification and compliances on SEZs.

The book is must for possession.

Rashmi Kumar Aggarwal

Assistant Professor

IMT, Ghaziabad