Comments
The Finance Minister, Mr Pranab Mukherjee, on Monday proposed to levy Minimum Alternate Tax (MAT) on Special Economic Zone developers and units, at 18.5 per cent of their book profits, from next fiscal.
SEZ developers said the decision “amounts to killing the SEZ scheme”, adding that they will soon take it up with Mr Mukherjee.
MAT is a levy on book profits of companies that does not have any taxable income either due to tax exemptions or actual losses. SEZ Act exempts SEZ developers and units from MAT.
The Government also proposes to impose dividend distribution tax (DDT) on SEZ developers, a move that would take effect from June 2011.
However, Mr Mukherjee gave some relief to SEZ units.
There is a proposal in the Budget to introduce a scheme by which “units in SEZs will be able to obtain tax-free receipt of services wholly consumed within the zone and get their refunds in a much easier manner.”
Mr Ashesh Safi, Partner, Deloitte Haskins & Sells, said costs will definitely go up for SEZ developers following the imposition of MAT.
Mr Ajay Nijhawan, Convenor, Export Promotion Council for EOUs and SEZs Panel for SEZ Developers, said, “This (imposition of MAT) annuls all benefits under the SEZ Act. There is no incentive now to units to come into SEZs. If companies do not set up units in their SEZs, developers — who have made huge investments in land and infrastructure based on the promises in the SEZ Act — will suffer losses. Most SEZs are long-gestation projects.”
He said SEZ developers will shortly make representations to the Finance Minister on the MAT issue, adding that the move will also adversely impact foreign direct investment into the country. It will result in migration of economic activity to other countries giving tax benefits, he said.
Also, many banks and financial institutions have exposure of thousands of crores of rupees to SEZ projects under various stages of development. Many of these SEZs are awaiting new units to come up. If benefits under the SEZ Act are taken away, these loans could turn non-performing assets, developers said.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.