Economy

SEZs seek further extension in direct tax sops for units

New Delhi | Updated on July 01, 2020 Published on July 01, 2020

Over the last few years, a number of SEZ developers have pulled out of their projects citing various reasons, including the economic slowdown   -  THE HINDU

Govt extended tax holiday for new units till September 30, 2020, but investors want it at least for entire fiscal

Special Economic Zones are trying to convince the government to go beyond the additional three months extension of direct tax holiday for new units (up to September 30, 2020), announced recently and instead offer the incentive for the entire fiscal.

The EPCES, in its submission to the Commerce Ministry, has argued that while the extension till September end was a good move that will help units, the tax benefits need to be on offer for the entire fiscal to attract larger number of units.

“We request the government to extend income tax benefit to all new units that start operations in 2020-21 so that more new units are motivated to come in, investments flow in and jobs get created. By extending the benefits for a longer time period we could also attract investors that are thinking of shifting their business from China,” said Anand Giri, Deputy Director-General, Export Promotion Council for EoUs and SEZs (EPCES).

As stipulated in the SEZ Act, the sunset clause set in on direct tax benefits for units on March 31, 2020. With investors pointing out that there were many SEZ units that had been approved but couldn’t start operations because of Covid-19 disruptions, the government decided to extend the benefits for three more months, till June 31, 2020.

But the three-month extension was not enough to allow most notified units to start operations and after persuasion from the industry and the Commerce Ministry, the Central Board of Direct Taxes extended the tax holiday further till September 30 in a notification issued on June 24.

“Instead of extending the tax holiday on a piece-meal basis, we believe that the government should, in one go, extend it for the entire fiscal or more, depending on the support it wants to give to SEZs. Once units get a signal that they would be eligible for tax benefits for some time to come, confidence will be built and more investments will flow into SEZs,” according to a Delhi-based expert on SEZs.

Once investors are motivated to invest, the 111 notified SEZs, which are not operational yet, will attract more units and prosper creating lakhs of jobs, said Giri.

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.

Fall in exports

SEZs have taken a severe beating due to disruptions caused by the pandemic. Export from SEZ units fell by more than 50 per cent while more than a third of the orders placed have been cancelled in April 2020 due to the pandemic, as per an internal survey carried out by the EPCES.

SEZs have attracted investments worth ₹5,32,631 crore so far and have provided direct employment to over 21 lakh. Exports from SEZs increased from ₹22,840 crore in 2005-06 to ₹7,01,179 crore in 2018-19

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Published on July 01, 2020
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