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Special Economic Zones (SEZs) have asked the government to extend direct tax holiday for new units beyond the three-month extension given to them which expires on June 30 as the Covid-19 pandemic had slowed down operations.
Extending the tax benefits by one year or more for new units will also help the 111 notified SEZs, which are not operational yet, to attract more units which will increase both investment flows and employment, the Export Promotion Council for Eous and SEZs (EPCES) has explained in a representation to the Commerce Ministry.
If the income tax exemption is extended beyond June 30, more units will come and provide employment which is urgently required at this point of time, according to Anand Giri, Deputy Director-General, EPCES.
The 111 notified SEZs have the potential to attract several hundred units providing employment to more than 30 lakh workers who would also pay income tax, added Giri.
On March 31, the sunset clause set in on direct tax benefits for units stipulated in the SEZ Act. The government, however, decided to extend the benefits for three more months for the SEZ units that have already been approved but could not start operations.
As most economic activities in the country and around the world had come to a stand still in this period because of Covid-19 disruptions, SEZs argued that more time need to be given to units to start operations.
IT body Nasscom too had represented to the government seeking extension of direct tax benefits for IT SEZs for the financial year 2020-21. It had said that because of the global pandemic even planned investments would take time to materialise.
The direct tax benefits for SEZ units include a 100 per cent income tax exemption on export income under Section 10AA of the Income Tax Act for the first five years, 50 per cent for the next five years thereafter and 50 per cent of the ploughed back export profit for five more years.
According to data shared by EPCES, investment of ₹532,631 crore has been made in SEZs so far and direct employment to over 21 lakh people has been generated. Exports from SEZs increased from ₹22,840 crore in 2005-06 to ₹7,01,179 crore in 2018-19.
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