Page 44 - ELT_1st September 2020_Vol 373_Part 5

A146 EXCISE LAW TIMES [ Vol. 373

chemicals are used in cleaning agents, fire extinguishers and refrigerants and
China is the largest exporter of these goods to India.
The Directorate General of Foreign Trade (DGFT) inserted a new policy
condition for various chemicals including organic chemicals.
[Source : The Economic Times, New Delhi, dated 12-8-2020]

That mysterious SEZ appeal
In the melee caused by the abrupt national lockdown on March 24, the
sun set unnoticed on a key income tax break for Special Economic Zones (SEZs)
on March 31. The post-lockdown economic tumult has distracted from the sever-
al calls over December and January to extend the 100 per cent income tax holiday
on export income from SEZs in the interests of attracting foreign investment for
the Prime Minister’s signature Make in India programme. The fascination with
SEZs endures, though they represent one of the most consistent failures of eco-
nomic policy since 1965, when Kandla, Asia’s first such zone, was set up.
Even after a high-profile new policy was announced in 2005, SEZs ac-
count for just about a third of India’s merchandise exports (and roughly the same
proportion of services exports). Yet the notion of creating global manufacturing
centres of the kind that propelled China to super power dom retains a durable
appeal within the Indian policy-making establishment.
A good part of the SEZ appeal lies in the promise of insulating manufac-
turers and service providers from the chaotic realities of doing business in India.
Unlike China, which modelled its SEZs on the Shannon free trade zone in Ireland
to offer global manufacturers the advantages of giant integrated efficiencies and
economies of scale, the principal impulse for India’s SEZs was to offer businesses
shelter from troublesome rules and regulations and tax laws.
But the United Progressive Alliance’s well-meaning 2005 efforts to revive
the SEZ concept ended ignominiously; just about a third of those that received
approval went into operation and several operators, who had gambled on SEZs
as a real estate play, were forced to deregister land when their projects were non-
starters.
On paper, the 2005 SEZ Act certainly offered a systemic approach - duty
free imports of raw materials, income tax breaks and exemption from domestic
Sales Tax and Excise (these were the pre-GST days). A special purpose Board of
Approval, chaired by the Commerce Secretary, would scan proposals and each
zone would have a single window authority to provide administrative, infra-
structure and other facilities. In short, India was to be transformed into an ag-
glomeration of streamlined futuristic enclaves with First World physical and
social infrastructure.
But if this updated Utopian (or at least Chinese) vision foundered it was
because SEZ policies were completely unaligned with other policies, principally
those related to land and labour, the permanent Achilles’ Heels of investment in
India. After much fierce debate, efforts to give SEZs relief from inflexible labour
laws and labour inspections and so on were turned down (this was when the Left
parties still had some influence in Parliament). So labour law compliances appli-
cable to any industrial unit in India were applicable to SEZs.

EXCISE LAW TIMES  1st September 2020  44