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CMA Final · Indirect Tax Laws and Practice · Special Economic Zone Scheme

The Board suspended a Developer's letter of approval on 1 April and an Administrator was appointed. The Board later invited applications and the letter of approval was transferred to a selected transferee on 1 September of the same year. Under Section 10, what is the position about the Zone's vesting in the Administrator and the Developer's liabilities?

The Administrator holds the Zone until the earlier of one year or the transfer, which here is 1 September. From that date the Developer's rights, duties, obligations and liabilities cease absolutely, except liabilities that accrued before that date.

  1. AThe Administrator holds the Zone for a full year regardless of the transfer, and the Developer remains liable for all liabilities
  2. BThe Administrator holds the Zone only until 1 September, the earlier of one year and transfer, and the Developer's liabilities cease except those accrued before that dateCorrect
  3. CThe Zone reverts to the Developer on 1 September and all liabilities continue
  4. DThe Administrator holds the Zone until the Central Government notifies a new area, and all Developer liabilities are extinguished

Explanation

Section 10(6) vests the Zone in the Administrator for not exceeding one year or until transfer, whichever is earlier. Here the transfer on 1 September is earlier than one year. Under Section 10(9)(c), the Developer's rights, duties and liabilities cease, except liabilities accrued before the date. The first option ignores the earlier-of rule.

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