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Expressing “surprise” at the Budget proposal to impose Minimum Alternate Tax on SEZ developers, the Commerce and Industry Minister, Mr Anand Sharma, has said that he has voiced his concerns to the Finance Minister, Mr Pranab Mukherjee, as the move would impact these projects.
Mr Pranab Mukherjee has proposed to levy 18.5 per cent MAT on the book profits of Special Economic Zone developers and units. The changes in the tax rate would be effective April 2012. Both developers as well as units in the tax-free enclaves were earlier exempted from MAT under Section 115 JB of the Income-Tax Act.
“I have discussed this (with Mukherjee) and I have written to the Finance Minister... It was a surprise and for the developers, surely it is a matter of concern,” Mr Sharma told reporters here today.
The Minister was surprised because MAT was scheduled to be imposed on SEZs when the Direct Taxes Code (DTC) is rolled out next year.
He, however, said that the Finance Minister has assured him that the benefits and concessions that were available to developers until 2012 and units until 2014 will be there.
“Our understanding has been that we will try to align it (imposition of MAT) with the coming in of the DTC, “he added.
MAT was introduced in 1987 to bring companies that paid no or very little tax, after taking advantage of the exemptions provided by the Income-Tax Act, into the tax net.
The Government has also proposed to impose dividend distribution tax on SEZ developers which would come into effect from June this year.
Exports from SEZs contribute about one-third of the country’s total exports. Shipments from these zones during April-December 2011, grew by 47 per cent to Rs 2,23,132 crore vis-a-vis the same period last year.
Under the SEZ Act, units get 100 per cent tax exemption on profits earned for the first five years, while developers get exemption for ten years. Additionally, units get a 50 per cent exemption for the next five years and another 50 per cent exemption on re-invested profits in the following five years.
So far, 582 SEZs have been formally approved by the BoA, of which 130 are in operation. SEZs have emerged as major sources for attracting investment and increasing exports in the country.
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