The government has decided to allow Special Economic Zones (SEZ) units to import used plant or machinery without any quantitative restrictions , provided the machinery was not used by the assessee (unit-owner) or previously used in India.

SEZ units will also be allowed to use second-hand machinery and plant previously owned by the assessee or used in the country to the extent of 20% of the total value of machinery or plant used in the business. Earlier, SEZs were not allowed to use old machinery and plants at all.

As per amendments in SEZ rules notified recently, Rule 18 (4) (g) prohibiting SEZ units to install previously-used machinery has been deleted. According to the amended rules, in case any machinery or plant previously used is transferred to a new business, then the total value of such machinery or plant so transferred should not exceed 20% of the total value of machinery or plant used in the business.

It has been clarified that imported machinery or plants will not be considered as items previously used under three conditions — the machinery or plant should not have been, at any time previous to the installation by the assessee, used in India; it should have been imported into India from any country outside India; and finally, no deduction on account of depreciation in respect of such machinery or plant should have been allowed or is allowable under the provisions of the Act in computing the total income of any person for any period prior to the date of the installation of machinery or plant.

Sources close to the ministry said that if the imported machinery or plant satisfies the stated conditions, SEZ units could import up to 100% of their requirement.

The Finance Act 2007 amended Section 10AA of the Income-Tax Act allowing SEZ units using up to 20% of used machinery IT benefits.

The amended rules also prescribes a maximum area of 5,000 hectares for multi-product SEZs and a minimum area of 1,000 hectares, as decided by the empowered group of ministers (eGoM) earlier this year. To attract more investments in industrially backward states like Himachal Pradesh, Uttaranchal, Sikkim, Jammu & Kashmir, the north-eastern states, Goa and all union territories, the minimum size requirement has been reduced to 200 hectares.

Mr. Rajeev Mehta

(Tradeindia Expert)

Mehta Stores

Managing Director, Mehta Stores
New Delhi, India