SEZ rules amended - Now they can use second-hand plant, machinery

New Delhi, Oct. 18 The Commerce Ministry has relaxed an existing restriction on use of second-hand plant and machinery by special economic zone (SEZ) units.

SEZ units could now use second hand plant and machinery to the extent of 20 per cent of the total value of plant and machinery used in the business and still be eligible for tax breaks available for such units under the income-tax law.

Hitherto, the SEZ rules barred SEZ units from using any plant and machinery previously used in the domestic tariff area (DTA). The income-tax law was however amended in Budget 2007-08 to allow SEZ units to get tax breaks if at least 80 per cent of the investments in plant and machinery are out of fresh investments.

The latest amendments to the SEZ rules would align them with the income-tax provisions on this issue. A department of commerce official said that instructions have been given to the Approval Committee to ensure that the 20 per cent level was not breached by SEZ units.

The SEZ rules had earlier barred the use of second hand plant and machinery in SEZ units as the Government was keen that SEZs should have only new investments and there should be no shift of businesses from the DTA into these zones. With the income-tax law undergoing a change, the Commerce Ministry has amended the SEZ rules to remove the paradox.

Multi-product SEZ

Meanwhile, SEZ rules have also been amended to stipulate that multi-product SEZs should have a contiguous area of 1000 hectares or more but not exceeding 5,000 hectares. The exception to this rule is in respect of SEZ units set up in Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram, Manipur, Tripura, Himachal Pradesh, Uttaranchal, Sikkim, Jammu and Kashmir, Goa or in a Union Territory, where the area would be two hundred hectares or more.

Moreover, at least 50 per cent of the area in a multi-product SEZ would have to be earmarked for developing the processing area.