SEZ Developer/Co developer Exit

[Abhijeet Mane]

We are a co developer in Puthuvypeen SEZ (Kochi) and exploring de notification. Dept. of Commerce (File No. F 2/15/2005 SEZ(Vol III)(Pt.), 10 Apr 2024) has clarified that Rule 49 depreciation applies to Developers at exit.

Need expert views on:

1. Does Rule 49 depreciation apply only to "capital goods" or also to "infrastructure" (civil/common assets), since "capital goods" is defined separately in Rule 2(e) of SEZ Rules?
2. If infrastructure is not eligible, is the standard practice to repay full duty/GST benefits actually availed (no depreciation), supported by CE certification? (As seen in Rule 11B clarifications.)
3. Any real cases of developer/co developer denotification and the methodology accepted by authorities for duty repayment?

AI Summary

Depreciation under Rule 49 applies to capital goods; immovable infrastructure benefits are typically repayable in full on exit.
Rule 49 applies a depreciation-based duty charge to capital goods removed from an SEZ to the Domestic Tariff Area, and-given the Rule 2(e) definition-covers plant, machinery and similar movable assets. Immovable civil infrastructure and common facilities generally do not qualify as capital goods and therefore do not benefit from Rule 49 depreciation; instead, repayment of fiscal benefits actually availed is the commonly adopted approach, supported by project records and certifications, with proportional allocation permitted for partial denotification subject to authority verification.