Millennium Post

SEZ work sub-contracting cap extended to 3 years

Manufacturing units in Special Economic Zones (SEZs) can now sub-contract work for up to three years, instead of just one year allowed so far, as the government has relaxed the norms to help boost shipments from special economic zones.

The request for relaxation came from large manufacturing units which have stated that the move would help facilitate manufacturing processes and augment exports.

'It has been decided that sub-contracting of production or any production process by large manufacturing SEZ units to domestic tariff area (DTA) units may be granted for a period up to 3 years at a time,' the commerce ministry has said.

However, the relaxation would apply to only those manufacturing units that have substantial exports with average annual shipments of Rs 1,000 crore or more in at least two out of four years.

'The units should have an annual average export of not less than 51 per cent of its total turnover in the block of 5 years. The units should have an un-blemished track record and no penalties against the unit for any violations...should have been imposed,' it said.

It also said that the DTA unit (unit outside SEZ) to which the sub-contract is to be awarded should be registered with the central excise department.

SEZs, which emerged as major export hubs and investment destinations started loosing sheen after the global economic crisis and imposting of minimum alternate tax.
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