The Commerce Ministry will make a fresh pitch for reinstating tax benefits for Special Economic Zone (SEZ) developers and units with the BJP-led Government which will take charge next week.
Tax exemptions for SEZs abruptly ended in 2011-12, six years after the SEZ Act was passed, when the Finance Ministry decided to introduce a minimum alternate tax of 18.5 per cent and a dividend distribution tax of 15 per cent on the zones.
“We are hopeful that the new guard at the Finance Ministry will recognise the need for a stable policy regime and restore tax exemptions promised in the SEZ policy,” a Commerce Ministry official told
The Act promised units a five-year complete tax holiday on profits, followed by 50 per cent exemption on profits over the next five years. Developers were promised a tax holiday for 10 consecutive years, which they could choose in a bracket of 15 years.
The Finance Ministry argued that the complete tax exemption was a big drain on the exchequer.
The Commerce Ministry has been lobbying with the Finance Ministry for the last three years, urging it to withdraw the taxes, or at least lower MAT to 7.5 per cent, as it was acting as a serious deterrent for attracting fresh investments.
Since out of the 43 SEZs formally approved in Gujarat, only 18 are operational, it is being hoped by some in the Commerce Ministry that the Narendra Modi Government will be sympathetic to the cause of developers.
Large corporates, including RIL, Ansals, Essar, DLF and Omaxe have got some of their SEZs denotified – fully or partially – after the Government imposed MAT.
“As the MAT is charged at 18.5 per cent, exporters from SEZs are not able to recover the MAT credit within the stipulated period of 10 years. Imposition of MAT and DDT has dented the investor friendly image of SEZs and created uncertainty in the minds of foreign investors,” said PC Nambiar of the Export Promotion Council for EOUs and SEZs.
Of the 576 SEZs formally approved in the country, 173 SEZs are operational and are exporting. More than 50 SEZs have been de-notified after MAT was introduced.
Exports worth ₹5,42,086 crore from SEZs and Export-Oriented Units were made, contributing 33 per cent to national exports.