TaxTMI 
TaxTMI 
Concerns/queries/clarifications regarding the newly inserted SEZ Rule 11 B notified vide DoC Notification dated 6.12.2023
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....vided in the enclosed Annexure. 3. This issues with the approval of competent authority. Encl: as above (Sumit Kumar Sachan) Under Secretary to the Govt. of India Tel. 011-23039829 Email: [email protected] Annexure Clarification in respect of Rule 11B of SEZ Rules, 2006 Issue 1: While paying back the tax benefits attributable to the built-up space to be demarcated as NPA under 11B(5) (i) or paying back tax benefits availed for creation of social or commercial infrastructure and other facilities under 11B(5)(ii) to be used by both SEZ processing and non-processing area, clarity is required on whether the duties are to be paid on the (i) depreciated value, (ii) prevailing value as certified by Chartered Engineer or (iii) to repaying the tax benefits that were originally availed. Further, whether tax paid as per the certificate issued by Chartered Engineer would be sufficient for SO to issue NOC. Response: In terms of Rule 11B of the SEZ Rules, 2006, demarcation of a Non-Processing Area (NPA) can be permitted only after repayment of the tax benefits that were originally availed viz. option (iii) abo....
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....cture and liability of the entire SEZ and not just a partial floor/ area to be demarcated as non-processing area. Issues 6. Whether the Cost of construction of Basement(s) of the building is also required to be included for repayment of proportionate tax benefits on the NPA floor of the said building? Response: The tax benefits on the construction of the building including basement should be taken into account for repayment of tax benefits attributable to the demarcated NPA floor in terms of Rule 11B (5) (i). Issues 7. Whether repayment of tax benefits on Plant & Machinery (capital goods) in the stock will be at the depreciated value in terms of Rule 49 of the SEZ Rules? Response: Rule 49 would be applicable for clearance of plant and machinery pertaining to 11B(5)(i) and not 11B(5)(ii) However, it is clarified that if benefit under 11B(5)(ii) has been taken then all benefits are to be repaid. Issue 8: A floor may have some SEZ units. These units may also like to serve only DTA and hence the whole floor may be demarcated as Non-Processing Area. How can this be enabled? Response: This situation is not envisaged as of now. However, SEZ units may opt ou....
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....n revoking this facility by GOI. Response: No additional I differential treatment envisaged to such units vis- åvis any other DTA units. In terms of Rule 11(B)(10), the businesses engaged in Information Technology or Information technology enabled Services Special Economic Zone in a NPA 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 (DTA). Issue 11. It is time consuming in computing the taxes and duties availed of by both the unit as well as the establishment providing services in the newly converted non-processing areas in proportion of the built up area over the past several years due to the time involved in retrieving the books of accounts in consultation with a Chartered Engineer which could typically go up to 3-6 months. Hence, it is requested to permit the Developers to convert to Non-Processing Area based on a undertaking that the Developer will refund all the concessions availed after the final computations have been assessed correctly and accepted by the concerned AO/ SO. This will allow the process to be initiated qu....
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....both SEZ units and businesses engaged in IT/ITES in non-processing area. Such common facilities envisaged are facilities (including common build up infrastructure and amenities like cafeteria, hubs) set up under Rule 11A(2). On the repayment of benefits under Sub-Rule 5(ii) of Rule 11B, the common infrastructure shall attain similar usages as dual use NPA as under 11A(I) subject to compliance of other provisions under SEZ Rules. Issue 15. Is this understanding correct? A Developer would only be required to repay the taxes on social and commercial infrastructure (without interest) while industrial infrastructure would continue to be duty free. Response. In terms of Rule 11B (5) (ii), common infrastructure would include all infrastructure and other facilities for common usage between SEZ units and non-SEZ IT/ITES units in the SEZ. Issue 16. As per Sub Rule 1, the Developer can request for demarcation of built-up space as Non- Processing area. Need clarity on whether Developer / Co-Developer can demarcate a portion of the 'Land' as Non-Processing Area that can be used for developing office space & infrastructure to be used / leased for IT/ITES units ....
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....le 11B of SEZ, Rules, 2006 contemplates demarcating a portion of the built up area of an IT/IT enabled services SEZ as a 'non processing area'. This 'non-processing area' may be used for setting up and operations of IT/IT enabled services. Now, the processing and non processing area have been outlined in Section 6 of SEZ Act. The Non-processing areas defined therein is meant inter alia for activities other than rendering services which invariably includes IT/IT enabled services. Therefore, it appears that the new insertion of Rule 11B of SEZ Rules, 2006 goes beyond the statutory provisions contained in the Act. If so, it should not happen that the unit provides IT/IT enabled services in the demarcated non-processing area of SEZ and there is a serious challenge of recognizing such services, which may create uncertainty or ambiguity in the operations of IT/IT enabled service provider. Response. The issue has been duly examined and it is noted that Rule 11B is in consonance with the provisions of the Act. Issue 21. As per Rule 11 B(9) of SEZ, Rules, 2006, it has been made clear that there shall be no tax benefits available on operation and maintenance....
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....ontrol mechanism for SEZ unit and business engaged in IT or IT ES in non-processing area to ensure adequate screening of movement of persons as well as goods in and out of their premises. Could you suggest the best methods for achieving this. Will this be sufficient to have different access cards and security guards etc. for those in non-processing area. Further, there would be common employees (HR, finance, legal etc.) for units in SEZ and non-processing area. Will there be any restrictions on movement of employees? Further, Will there be any additional requirement or specific requirements for scrutiny/verification for good being procured by units in non-processing area? Response. Jurisdictional I-JAC shall specify the mechanism for access control as well as movement of common employees based on specific requirements of the SEZ after considering the risk profile of each SEZ on a case-to-case basis. No. There is no additional requirement or specific requirements for scrutiny/verification for goods being procured by units in non-processing area. Issue 29. Can the non-processing area also comprise of living area or housing for employees/gu....
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....TES SEZs FOR SETTING UP OF NON SEZ IT/ITES UNITS [Refer rule 11 (B)] 1 .Name and address of the Developer: 2. Letter of Approval No. and date: 3. Date of Notification: 4. Name of the sector of SEZ for which approval has been given: 5. Total Notified Area of Special Economic Zone (in hectare): 6. Total area of - (i) Processing Area ____hectare (ii) Non Processing Area _____ hectare 7. Details of Built up area . (i) No. of towers with built-up area of each tower (in square meter) (ii) Total Built-up area ____ Square meter. 8. Total Built up area in - Processing Area ____Square meter. Non - Processing Area ____Square meter. 9. Total numbers of floors in the building wherein demarcation of NPA is proposed. 10. Total Built up area proposed for demarcati....