SEZ (Amendment) Rules, 2017 – Boon or Bane for Law Firms

The Amendment of Rule 76 of the SEZ Rules, 2006 on January 3, 2017 to allow Law and Accountancy Firms to set up shops in SEZs, though short in content, is arguably big on implications for domestic and foreign Law Firms. This amendment, while allowing foreign Law Firms to set foot on Indian soil, also extends an opportunity to domestic Law Firms for a tax-efficient operation.

With restriction on SEZ operation now removed, domestic Law Firms may increasingly relocate to SEZs. Should a domestic Law Firm decide to serve DTA and offshore Clients from its SEZ office, its services would be basically of two types – taxed services to DTA Clients and tax-exempted services to offshore clients and SEZ units. To this extent, the Amendment could be a bonanza for offshore clientele practice of domestic Law Firms, though it may not necessarily result in business volume expansion. A regulatory challenge will, however, be ensuring that DTA related services are not passed off as