Government permits hybrid working for units in Special Economic Zone

Background

The Special Economic Zone (SEZ) regime, which was introduced in 2005 to promote exports and improve balance of payments, became less lucrative with sunset of income tax benefits granted thereunder. In view thereof and with an objective of unfettering the exporters from procedural hindrances, the Hon’ble Finance Minister, in her budget 2022 speech, announced replacement of this framework by September 2022.

Pending this revision and to suit the hybrid working model adopted by the IT/ITES globally, the Ministry of Commerce and Industry, has amended the existing Special Economic Zone Rules, 2006 vide the SEZ (Third Amendment) Rules 2022 dated 14 July 2022. In terms of this amendment, the existing Rule 43 has been amended and a new Rule 43A, to permit the IT/ ITES SEZ units, to implement hybrid working upon application.

The Hybrid Working Model – Permissions and Records

In terms of the newly introduced Rule 43A, a maximum of 50% of employees (including the contractual employees) of an IT/ITES SEZ unit would be permitted to work from outside the SEZ premises, at a given point in time. However, these limits can be stretched to permit even higher number of employees to work from home in bona fide cases, at the discretion of the development commissioner.

For the above, detailed procedure for obtaining the permission and maintaining the records has been prescribed, which is summarized below:

The permission for temporary removal of goods would be valid up to the end date for hybrid work permission granted by development commissioner.

Comments

As the global IT/ITES industry promptly adapted to the pandemic induced dynamics, statutory acceptance of hybrid working model comes as a significant respite for the units operating in SEZ area. Though the proposed amendment provides a detailed manner of application and approval, we believe that the industry would require clarity on operation implementation inter alia, on procedural aspects such as format of application, permissible terms and condition including minimum work hours, timings, employee rotation policy, frequency of submission of attendance or work from home records, etc.

In addition to the above, the SEZ Units also needs to keep a beady eye on the proposed new SEZ law and inter-play thereof with what appears to be stop-gap measure by the government.

-     Ayush A Mehrotra (Partner) and Upkar Agrawal (Senior Associate)

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