Ministry of Commerce and Industry notifies Amendment to SEZ Rules, specifies Processing and Non-Processing Areas [Read Notification]

The Central Government Ministry of Commerce and Industry has notified an amendment to the Special Economic Zone (SEZ) Rules by way of the Special Economic Zones (Fifth Amendment) Rules, 2023. The new amendment outlines the specifications for demarcation of SEZ territory as processing and non-processing areas. Further, the notification states that, the businesses engaged in Information Technology or Information Technology Enabled Services Special Economic Zone in a non-processing area shall not avail any rights or facilities available to Special Economic Zone Units. As a result, No tax benefits shall be available on operation and maintenance of common infrastructure and facilities of such an Information Technology or Information Technology Enabled Services Special Economic Zone. Further, the businesses engaged in Information Technology or Information Technology Enabled Services Special Economic Zone in a non-processing area shall be subject to provisions of all Central Acts and rules and orders made thereunder, as are applicable to any other entity operating in domestic tariff area. The notification states as follows: – “In exercise of the powers conferred by section 55 of the Special Economic Zones Act, 2005 (28 of 2005), the Central Government hereby makes the following rules further to amend the Special Economic Zones Rules, 2006, namely: - 1. (1) These rules may be called the Special Economic Zones (Fifth Amendment) Rules, 2023. (2) They shall come into force on the date of their publication in the Official Gazette. 2. After rule 1 IA of the Special Economic Zones Rules, 2006, the following rule shall be inserted, namely: - "11 B. Non-processing areas for Information Technology or Information Technology Enabled Services Special Economic Zones:- (1) Notwithstanding anything contained in rules, 5,11,1 IA or any other rule, the Board of Approval, on request of a Developer of an Information Technology or Information Technology Enabled Services Special Economic Zones, may, permit demarcation of a portion of the built-up area of an Information Technology or Information Technology Enabled Services Special Economic Zone as a non processing area of the Information Technology or Information Technology Enabled Services Special Economic Zone to be called a non-processing area. (2) A Non-processing area may be used for setting up and operation of businesses engaged in Information Technology or Information Technology Enabled services, and at such terms and conditions as may be specified by the Board of Approval under sub-rule (1), (3) A Non-processing area shall consist of a complete floor and part of a floor shall not be demarcated as a non-processing area. (4) There shall be appropriate access control mechanisms for Special Economic Zone Unit and businesses engaged in Information Technology or Information Technology Enabled Services in non-processing areas of Information Technology or Information Technology Enabled Services Special Economic Zones, to ensure adequate screening of movement of persons as well as goods in and out of their premises. (5) Board of Approval shall permit demarcation of a non-processing area for a business engaged in Information Technology or Information Technology Enabled Services Special Economic Zone, only after repayment, without interest, by the Developer, (i) tax benefits attributable to the non-processing area, calculated as the benefits provided for the processing area of the Special Economic Zone, in proportion of the built up area of the non-processing area to the total built up area of the processing area of the Information Technology or Information Technology Enabled Services Special Economic Zone, as specified by the Central Government. (ii) tax benefits already availed for creation of social or commercial infrastructure and other facilities if proposed to be used by both the Information Technology or Information Technology Enabled Services Special Economic Zone Units and business engaged in Information Technology or Information Technology Enabled Services in non-processing areas. (6) The amount to be repaid by the Developer under sub-rule (5) shall be based on a certificate issued by a Chartered Engineer. (7) Demarcation of a non-processing area shall not be allowed if it results in decreasing the processing area to less than fifty per cent of the total area or less than the area specified in column (3) of the table below: Categories of cities as per Annexure IV-A - Minimum built-up processing Area 1. Category A 50,000 square meters 2. Category B 25,000 square meters 3. Category C 15,000 square meters (8) The businesses engaged in Information Technology or Information Technology Enabled Services Special Economic Zone in a non-processing area shall not avail any rights or facilities available to Special Economic Zone Units. (9) No tax benefits shall be available on operation and maintenance of common infrastructure and facilities of such an Information Technology or Information Technology Enabled Services Special Economic Zone. (10) The businesses engaged in Information Technology or Information Technology Enabled Services Special Economic Zone in a non-processing area shall be subject to provisions of all Central Acts and rules and orders made thereunder, as are applicable to any other entity operating in domestic tariff area. Notably, The principal rules were published in the Gazette of India, Extraordinary, Part-Il, Section 3, Sub-section (i), vide notification number G.S.R 54(E), dated the 10th February, 2006 and lastly amended vide notification number G.S.R. 824(E), dated the 7th November, 2023. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates