Inter-Ministerial Approval Board Can Permit Demarcation Of Non-Processing Area Under IT Sector SEZs

The inter-ministerial board of approval, on request of a developer of an IT/ITeS sector special economic zone, can permit demarcation of non-processing area of that zone, according to an official notification.

The inter-ministerial Board of Approval is the highest decision-making body on special economic zones (SEZs). It is chaired by the commerce secretary.

The commerce ministry's notification said that a non-processing area under such SEZs can be used for setting up and operation of businesses engaged in Information Technology (IT) or Information Technology Enabled services (ITeS) sector.

For this, the ministry has amended the Special Economic Zones (Fifth Amendment) Rules, 2023.

Inserting a new rule, the notification said: "...the Board of Approval, on request of a developer of an IT or ITeS SEZs, may permit demarcation of a portion of the built-up area of an IT or ITeS SEZ as a non-processing area of the IT or ITeS SEZ to be called a non-processing area." In the processing area, units are located for manufacturing of goods or rendering of services. Non-processing areas are where supporting infrastructure is created.

It also said that the board would permit the demarcation 'only' after repayment, without interest, by the developer.

"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...," it added.

The notification also said that the businesses engaged in these zones in a non-processing area would not avail any rights or facilities available to SEZ units.

It added that no tax benefits shall be available on operation and maintenance of common infrastructure and facilities of such an IT/ITeS zone.

Welcoming the move, Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure Ltd, said that this revised policy not only facilitates the expansion of companies' office spaces but also extends the benefits of SEZ areas to non-SEZ entities.

"It's a proactive move by the government, optimizing the utilization of real estate resources,' he said, adding, 'presently, the country boasts around 170 million square feet of ready IT SEZ office space in the top 6 cities, with nearly 20 per cent (over 30 million square feet) lying vacant. Additionally, about 10 million square feet of SEZ spaces are under construction and set to be completed within the next 2 years."