Citing the country’s over-all adverse export performance and the positive role played by Special Economic Zones in boosting shipments, the Commerce Ministry has made a fresh proposal to the Finance Ministry to restore tax benefits to units in the zones.

It has also urged the Finance Ministry not apply the sunset clause on such benefits as it could lead to all such sops drying up in a few years.

“We have again proposed to the Finance Ministry that the minimum alternate tax on SEZs should either be eliminated or reduced to 7.5 per cent and units be given longer than 10 years for its set-off against regular taxes,” Commerce Ministry Additional Secretary Alok Vardhan Chaturvedi said at a SEZ convention organised by industry body Assocham on Thursday.

Chaturvedi argued that while MAT was an advance tax and can be adjusted, it is of a very high rate (20.5 per cent) and the period provided for its adjustment is such that the SEZs will end up paying income tax as the entire MAT credit is not adjustable within the limited period of 10 years.

If MAT is not reduced or eliminated, the set-off period should be extended from 10 years till the entire MAT credit is adjusted against the tax liability, he added.

Pointing out the important role played by the zones in the economy, Chaturvedi said that while overall exports from the country in the previous fiscal declined, exports from SEZs, accounting for 16 per cent of total shipments, increased, although marginally.

Online platform The Additional Secretary said that he will set up an online platform soon for SEZs to voice their concerns.

A case has also been made by the Commerce Ministry for not applying the sunset clause on tax benefits under the SEZ scheme as the clause is already “in-built’’ into the rules.

“It has to be understood that a sunset clause is already inbuilt into the SEZ policy as tax-breaks are enjoyed only for a specific time-frame,” pointed out TV Ravi, Director, Commerce Ministry.

When smaller countries such as Bangladesh and Nepal can give tax incentives to their SEZs, there is no reason why Indian can’t continue to do so, he said.

The Union Budget, this year, proposed to abolish all direct benefits for SEZs that are operationalised after March 31 2020. It is in line with the Finance Ministry’s over-all policy to phase out exemptions and reduce corporate tax rate to 25 per cent in four years. The SEZ policy, enacted in 2005, entitles units to 100 per cent income tax exemption on export income for first five years, 50 per cent for next five years and 50 per cent of the ploughed back export profit for the subsequent five years.

The introduction of an 18.5 per cent MAT on SEZ units in 2011, however, has served as a disincentive for investors with several developers opting out.

The Commerce Ministry has also reiterated the demand for utilisation of idle capacities in SEZs by permitting units to perform job work for units in the domestic tariff area outside the zones and sell products outside the zones by paying lower import duties offered by India to its free trade partners.

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