Clarification on Broad-banding in IT/ITES Sector SEZs
COMMERCE Ministry received a number of requests from Developers in IT/ITES sector to broad-band their product profile by including electronic hardware. In this regard it was clarified by the Ministry that no approval of BoA is required for broad-banding, since IT/ITES includes both Hardware and Software.
In common parlance, ‘broad-banding' means expanding the ‘product profile' of a manufacturer or a service provider. In this regard, it may be noted that Rule 19 of SEZ Rules, 2006 which relates to issuance of letter of approval to a unit stipulates in sub-rule (2) that, a letter of approval issued by the DC shall specify the items of manufacture or particulars of service activity, including trading or warehousing, projected annual export and NFEE for the first five years of operations, limitations, if any on DTA sale of finished goods, by-products and rejects and other terms and conditions, if any, stipulated by the Board or Approval Committee.
The first proviso thereof states that the Approval Committee may also approve proposals for broad-banding, diversification, enhancement of capacity of production, change in the items of manufacture or service activity, if it meets the requirements of Rule 18. The second proviso goes on to state that no such approval shall be granted by the Approval Committee in those cases which fall within the competence of the Board of Approval.
The moot point therefore is that ‘broad-banding' may have to be understood in the context of expanding the product profile of a manufacturer, which in the instant case would be a unit approved to be set up in a SEZ. The SEZ Rules do not make any mention of broad-banding for developers because it is common knowledge that developers only develop requisite infrastructure for software or hardware units or service providers and it is the units which are actually engaged in manufacture of hardware or software or provision of service.
Now, the above clarification speaks of no requirement of an approval from BoA for broad-banding the product profile of Developers in IT/ITES sectors to specifically include electronic hardware. Is the ministry under the impression that Developers are engaged in manufacture of electronic hardware or software?
SEZ Instruction No. 52, Dated: April 20, 2010