SEZSEZs – Relaxations During Pandemic

June 11, 20200
PRELUDE
On account of the Pandemic outburst of COVID-19, the Central Government declared a complete lockdown from 25th March, 2020 onwards in various phases.
In subsequent lockdown, the Ministry of Home Affairs vide Guidelines dated 15th April, 2020, issued relaxations for Special Economic Zones (“SEZs”) wherein the Government from 20th April, 2020 allowed operations of Manufacturing and other Industrial Establishments with access control in SEZs.
Despite such relaxations, SEZs and the export-hubs have had suffered an impact of COVID – 19 on their numbers and which may be reflected in their business cycles during next 2-3 quarters.
The concerned Ministry answering several queries regarding the impact of COVID – 19 issued a press release wherein the decreased supply on raw materials from China to India was predicted leading to impact on pharmaceutical, electronic, automobile industry, etc. amongst the other effects. The relaxations extended to SEZs may work as a stitch in time.
We have addressed some of the frequently asked questions on relaxations related to  SEZs during the era of COVID-19. 
 
RELIEF UNDER SECTION 10AA OF INCOME TAX
1. Whether the last date to commence operations, falling due between 20th March, 2020 to 29th June, 2020, for SEZ unit, for claiming deduction under Section 10AA of Income Tax Act, 1961, has been extended?
Answer: Yes, Section 3 of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance 2020, has extended the last date to commence operations, falling due between 20th March, 2020 to 29th June, 2020, for SEZ unit, for claiming deduction under Section 10AA of Income Tax Act, 1961 till 30th June, 2020.
SEZ – QUARTERLY AND ANNUAL REPORT
2. Whether the due date for filing of Quarterly Progress Report, duly attested by Independent Chartered Engineer, by SEZ Developer or Co-developer for the period quarter ending 31st March, 2020 has been extended? 
Answer: Yes, the Ministry of Commerce & Industry, vide Press Release dated 30th March, 2020, has directed Development Commissioner of SEZs to give ad hoc interim extension till 30th June, 2020 or further instructions of the Department on the matter, whichever is earlier, for filing of Quarterly Progress Report by SEZ Developer or Co-developer.
3. Whether the due date for filing of Annual Progress Report for Financial Year 2019-2020 by the SEZ units has been extended?
Answer: Yes, the Ministry of Commerce & Industry, vide Press Release dated 30th March, 2020, has directed Development Commissioner of SEZs to give ad hoc interim extension till 30th June, 2020 or further instructions of the Department on the matter, whichever is earlier, for filing of Annual Progress Report for Financial Year 2019-2020 by the SEZ units.
 
SEZ – COMPLIANCE
4. Whether any extension has been granted to SEZ Developer/ Co‐developer /Units with respect to the compliances, due during the period of pandemic COVID 19, under SEZ Act, 2005 and rules and regulations made thereunder?
Answer: Yes, the Ministry of Commerce & Industry, vide Press Release dated 30th March, 2020, provided that all the extensions related to compliances by SEZ Developer/ Codeveloper/ Units may be facilitated through electronic mode and where it is not possible to grant extension through electronic mode, the Development Commissioners are directed to ensure that the Developer/ Co‐developer/ Units do not face any hardship due to such expiry of validity during this period of disruption.
5. What will be the consequences, if the SEZ Developer/ Co-developer/ Unit fails to meet any compliance requirement due to the disruption cause by COVID-19?
Answer: The Ministry of Commerce & Industry, vide Press Release dated 30th March, 2020, has directed the Development Commissioners of SEZs to ensure that no hardship is caused to SEZ Developers / Co‐Developer/ Units and no punitive action is taken in cases where any compliance is not met during the period of lockdown in the country.
SEZ – LETTER OF APPROVAL
6. How to apply for extension of Letter of Approvals (“LOAs”) which are due to expire after 24th March, 2020?
Answer: The Ministry of Commerce, vide Press Release dated 30th March, 2020, provided that all the extension of LoAs may be facilitated through electronic mode and where it is not possible to grant extension through electronic mode, the Development Commissioners are directed to ensure that the SEZ Developer/ Codeveloper/ Units do not face any hardship due to such expiry of validity during this period of disruption.
SEZ – LEASE RENT RELAXATIONS
7. What interim relief measures are announced by the Government with regard to lease rent for SEZs?
Answer: The Ministry of Commerce & Industry through the Department of Commerce, SEZ Division vide Notification No. K-43014(16)/5/2020 – SEZ dated 11th May, 2020 announced that there shall be no increase in lease rent for SEZs units for the Financial Year 2020-2021.
8. What reliefs are provided to SEZ for payment of lease rent of the first quarter?
Answer: The Ministry of Commerce & Industry through the Department of Commerce, SEZ Division vide Notification No. K-43014(16)/5/2020 – SEZ dated 11th May, 2020 announced that the payment of lease rent of the first quarter to be deferred up to 31st July, 2020.
The Notification also clarified that such deferment may not invite interest.
The Government has also advised the Development Commissioners of State Governments / Private SEZs to adopt similar relief measures.
RELAXATIONS GIVEN BY RBI
9. Whether the time limit, prescribed under Foreign Exchange Management Act, 1999 and regulations made thereunder, for realisation of export proceeds against the export of goods or software has been extended?
Answer: Yes, the Reserve Bank of India (“RBI”), vide Notification No. FEMA 23(R)/(3)/2020-RB dated 31st March, 2020, extended the time limit for realisation of export proceeds against the export of goods or services, from 9 months to 15 months.
10. What relaxations are provided by RBI with respect to the delay / postponement of orders faced by exporters?
Answer: Yes, the RBI vide Notification No. DOR.DIR.BC.No.73/04.02.002/2019-20 dated 23rd May, 2020 announced extension for period of advance for pre-shipment and post-shipment export credit. In light of the exporters facing genuine difficulties such as delay / postponement of orders, delay in realisation of bills, etc. the RBI has decided to increase the maximum permissible period of pre-shipment and post-shipment export credit sanctioned by banks from one year to 15 months, for disbursements made up to 31st July, 2020.
 
 IMPACT ON SEZs
It is well known that SEZs are attractive investments hubs for Indian and foreign investors. They have the biggest potential to bring growth back in the economy by assisting the interplay of business and technology.
Like all the other pillars of economy, SEZs too faced an impact of COVID-19 and to not let the situation go worse, the Government announced the above relief measures and relaxations.
The Government, during the initial period of the lockdown, emphasised on Gujarat International Finance Tec-City (“GIFT City”). In a unit approval meeting, entities were expeditiously given a green signal to the business plans with potential to create more employment. The Government has virtually approved the said entities providing pro-active support. Therefore, it is also a step by the Government towards encouraging digitization, which is a requirement post COVID – 19.
In the coming days, the SEZs like GIFT City can be a game changer for the country which is struggling to come out of the slackness created by series of lockdown and business disruption due to the Pandemic COVID-19.
We, at AMLEGALS, anticipate that we may see robust changes in FTP and more particularly for SEZs in near future since the entire business dynamics will be changed post COVID – 19 lockdown and with such changes, the expected policies must be very vibrant to support the upliftment of the business cycle again.
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