December 5, 2011
https://www.facebook.com/mehtarahulc/posts/10150399041986922
https://www.facebook.com/mehtarahulc/posts/10150399041986922
It will be easy for foreigners to create tax-free business ventures inside India.
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It was quietly done, without any publicity. A group of senior bureaucrats, presumably at the behest of their political masters, recently chose to reinterpret rules governing the sale of assets in Special Economic Zones (SEZs) in a manner which will greatly benefit foreign investors by enabling them to acquire real estate.
While the recent decision to allow FDI in retail will allow foreign parties to own urban real estate as part of the business, the SEZ decision will enable further transfers of developed land to foreign parties — in violation of the laws of the land in letter and spirit. In the process, it will also bail out Indian real estate firms like DLF which are heavily in debt.
This reinterpretation of rules relating to the acquisition of land and property in SEZs by foreign firms is being perceived as a major policy turnaround that has taken place through the backdoor. It is tantamount to a significant policy change that has been done through executive fiat without the approval of either the Union Cabinet or an Empowered Group of Ministers (eGoM), leave alone the Parliament of India.
After the law governing the establishment of SEZs was enacted in 2005, the government’s policies were criticised on the ground that enterprises set up in these zones with generous tax concessions would not really spur exports but would degenerate into real estate rackets. The government responded by stating that adequate safeguards will be put in place to prevent this from taking place.
However, six years later, the fear that assets in SEZ would be freely traded primarily to benefit foreign companies and not significantly enhance the country’s exports seem to be coming true.
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