In this blog post, Nabarun Roy, Superintendent of Central Excise and Customs, Export Refund Section, Central Excise, Kolkata – I Commissionerate, Kolkata under the Dept. of Revenue, Ministry of Finance, Government of India, who is currently pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses the taxation structure of Special Economic Zones in Rajasthan. 

Introduction

The location of Rajasthan, with almost 40% of the Delhi-Mumbai Freight Corridor passing through it and its proximity to the Delhi International Airport and the ports of the western coast, marks it as a state with immense possibilities in the field of export-oriented initiatives. Hence, the given topic is extremely pertinent to the field of budding entrepreneurs seeking to establish their business. This topic at the same time emphasises on international trade.

The state has inherent potential in the fields of Gems & Jewelleries, woollen carpets, Handicrafts etc. and considering all these, it has been the earnest endeavour of the state government to lay special emphasis on the development of SEZs, by enabling infrastructure and providing tax benefits to promote exports. It may also mentioned here that the state already has six SEZs with an approximate investment of 170 Billion and located at Jaipur, Jodhpur, Kota, Udaipur, Banswara, Alwar, Bikaner etc., in the fields of Gems and jewellery, medical tourism, Textile & Garments, Services, R&D, Biotechnology, Information Technology, Development of renewable sources of energy like solar or wind, free trade & warehousing, agro based products, etc.

Present Tax Structure

Now, we are going to focus on the kind of tax exemptions available in the state of Rajasthan relating to the establishment of SEZs which is very important for consideration of a proposal for setting up of businesses by the entrepreneurs.

Various incentives and facilities are given by the Rajasthan Govt. in this respect are as follows:

1. Land conversion @Rs.100/- to developers in rural areas. This is an attractive incentive given to developers for initiating their projects in the rural areas at a very cheap rate for land conversion.
2. 100% exemption on stamp duty to developers and to units in RIICO SEZs. The stamp duty is a large deterrent factor as it involves a lot of money because of the duty to be paid to the government exchequer, exemption of which is an effective incentive for the developers.
3. 50% exemption on electricity duty for seven years. During the commencement of a business, a lot of money is spent in the form of electricity bills. If half of the bill is waived and that too for a period of 7 years, then it can be a very good start for the developers.
4. 100% exemption from work contract tax to units and developers for seven years. This is a very attractive opportunity for the developers, which helps in saving a huge amount of money and it helps in generating cash for the development of the project.
5. 100% exemption from entry tax on capital goods brought into local areas by the unit required for use as capital goods for setting up industry in SEZs. It is an equally useful point of saving for the developers.
6. 100% exemption from VAT onsale or purchase by a registered dealer being an industrial unit established in a SEZ for goods specified in the Certificate of Registration for the purpose of exclusive use in the manufacturing of goods for sale in the course of export out of the country. A full exemption of VAT in this respect should imply that the Rajasthan government is serious about developing the SEZs.
7. 100% exemption from luxury tax for seven years. A very good tax holiday period for the entrepreneurs.
8. 50% exemption from entertainment tax for seven years. All these exemptions, including this one, seek to address two issues. First, generation of much-needed cash for the management of the business in the initial years and second, relief from the hassles of payment of various taxes and litigations involved therein.

Thus, it is obvious that the Rajasthan government is able to provide quite a lucrative playing field to the developers as well as the budding entrepreneurs to invest and work in the SEZ area therein and avail the benefits available.

New SEZ Bill and Policies for SEZ

Apart from the above, new SEZ Act is also under consideration, and after its implementation, some more incentives will be available to the SEZs. The Rajasthan SEZ policy also states that the operations to be executed in the SEZ area are to governed by a joint venture of both public and private sector.

Following are the few policies of the Rajasthan SEZ formulated by the state government for the projects of Rajasthan Special Economic Zone:

1. There will not be any taxation on the developers of SEZ units as detailed above.
2. The central government will provide enough grants and equity to the SEZ projects.
3. One of the officers of the Rajasthan State Pollution Control Board will always be available in the Development Commissioner’s office to keep a check on the environment related issues.
4. Distribution of electricity and power will be sufficient to avoid any uncanny hindrance that may have a chance on the development of SEZ.
5. Sufficient water supply will be there for carrying out every work in the SEZ.
6. The state government will also provide a specific area for public utility services in the zone.
7. The Development Commissioner will permit registration of any SSI as well as IT units in the special economic zones.
8. SEZs are considered as an Industrial Administrative Divisions by the state government.
9. The SEZ policy also states that the zone will enjoy a single window clearance that is a smooth and hassle free clearance for everything at one go.
10. The SEZ developers or agency will enjoy the privilege of government land under Land Acquisition Act
11. Smooth connectivity of state and national highways will be provided by the PWD of the SEZ.
12. Clinics, police stations, academic institutions, etc. will be set up for the family of workers and for the inhabitants of the state
13. A high-power committee will review the development issues of the SEZ which will be formulated by the state government as per the SEZ policy.

Thus, it can be seen that the Special Economic Zone Policy of the Rajasthan State strictly follows a liberal regime in terms of taxation, foreign investment and other dealings.