The Union Cabinet will soon consider a comprehensive Special Economic Zones Bill, which would lay down guidelines for their development, operation and management.

Official sources said here that a Cabinet note on the Special Economic Zones bill, 2003 had been prepared and circulated to the ministries.

The issue was expected to come up for consideration of the Cabinet soon.

While the government has already in-principle approved the setting up of 17 SEZs in the country, the law will seek to lay down rules on all matters related to these zones, sources said, adding that the law was expected to be taken up during the current budget session of Parliament and be effected by May this year.

The draft law, provides for the establishment of an SEZ authority and seeks to exempt these zones from central legislations namely -- the Indian Stamp Act, 1899, the insurance act, 1938, the Banking Regulation act, 1949 and the Sick Industries Act, 1985.

The law also envisages granting these zones, deemed to be foreign territory for the purpose of trade operations, exemptions from customs and excise duty as also income tax exemptions for a block of 10 years in the first 15 years of operation.

As per the draft bill, these zones would be exempted from 100 per cent income tax for five years in a block of 10 years of operations and 50 per cent of the peak rate of income tax thereafter.

As per the draft law, sale from domestic tariff area to SEZ units and between SEZ units shall be treated as exports under the Income Tax Act.

The act also provides for the setting up of an SEZ authority to be located at each of these zones, including Kandla, Santa Cruz, Chennai, Noida, Falta, Cochin and Visakhapatnam.

"The authority shall furnish to the central government at such time and in such form and manner as may be prescribed or as the central government may direct such returns and statements and such particulars in regard to the development, operation and maintenance of SEZs and units in SEZs as the government may from time to time require," the drafts states.

The draft law also provides for constitution of designated special courts or nomination of a single agency by the Government to investigate and take action in respect of prescribed economic offences committed in SEZs.

Several states including Uttar Pradesh, Madhya Pradesh and Karnataka have unveiled their own SEZ policy. Uttar Pradesh has already effected its own SEZ act.

The central legislation will seek to lay down the broad guidelines under which states would be able to lay down rules on issues which fall under their purview.

The newly created Export Council on EPZ/EOU and SEZ has said the SEZ act should provide for a liberal labour policy regime with simple and clear exit policy, time bound single window clearances from central and state governments including pollution control and electricity boards.