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The Commerce Ministry is asking for a roll back of the Budgetary proposal to levy Minimum Alternate Tax (MAT) on Special Economic Zone (SEZ) developers and units, at 18.5 per cent of their book profits, from next fiscal.
MAT is a levy on book profits of companies that do not have any taxable income either due to tax exemptions or actual losses. SEZ Act exempts the SEZ developers and units from MAT.
“This (the proposal to impose MAT on SEZs) is our main concern on the legislative side. We are asking for a roll back,” the Commerce Secretary, Dr Rahul Khullar, told Business Line . The Commerce Ministry has also taken up with the Finance Ministry the Budgetary proposal to impose Dividend Distribution Tax on SEZ developers, he said.
However, he indicated that there would not be any extension of the tax holiday for export-oriented units, which ends on March 31.
Adverse impact
Meanwhile, during the day, the Commerce and Industry Minister, Mr Anand Sharma, told reporters that he has conveyed his concerns to the Finance Minister, Mr Pranab Mukherjee, on the proposed MAT on SEZs and its adverse impact on these enclaves.
Mr Sharma said the MAT levy proposal came as a surprise to SEZ developers and units as it was earlier proposed in the Direct Taxes Code Bill that MAT would be imposed only from 2012-13.
Mr Sharma said Mr Mukherjee has given assurance that the benefits and concessions that were available to the developers until 2012 and the units until 2014 will stay unchanged. The Commerce Ministry's understanding has been that the Government would try to align the imposition of MAT with the implementation of DTC, he added.
After the Budget, SEZ developers had said that the proposal to impose MAT annuls all benefits under the SEZ Act as there is no incentive now for units to come into SEZs. If companies do not set up units in their SEZs, the developers — who have made huge investments made in land and infrastructure based on the promises in the SEZ Act — will suffer losses, they said, adding that most SEZs are long-gestation projects.
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