India moves closer to offshore finance center status

Sandeep Banerjee

Thursday, May 5, 2005 (New Delhi):

The process of setting up mini-Chinas in India has begun with the Cabinet clearing the Special Economic Zone or SEZ Bill.

Ministry officials say that the SEZ Bill will be comprehensive and self-sufficient and will address all the demands and concerns of the industry.

Tax benefits

* Currently, SEZ units enjoy direct tax benefits for 10 years. This will now be extended to a period of 15 years.
* For the first five years, 100 per cent of the units' export profits will be tax free.
* For the next five years, 50 per cent of the profits will be tax free.
* Fifty per cent of the profits that are invested will get tax benefits for another five years.
* There will be no indirect taxes like customs and excise duties.
* But if the units sell their products in the domestic tariff area, they will have to pay duties.
* Offshore banking units set up in the SEZs will be under RBI regulations.

Labour laws

On the crucial question of labour laws, the Bill will give state governments the power to legislate on labour laws for SEZs in their states.

The Commerce Ministry shall be the nodal ministry in this whole exercise.

Indian industry has welcomed the SEZ bill and is keenly watching the political space.

Commerce Minister Kamal Nath returns from Paris later this week and if all goes according to script, the bill will be tabled in Parliament next Monday.