Economy

Tata Power seeks extension of permission for SEZ unit in Bengaluru

Amiti Sen | Updated on March 18, 2020 Published on March 18, 2020

If company can operationalise unit before March 31 2020, it will be eligible for direct tax exemptions

New Delhi, March 18 Tata Power Company Ltd has sought an extension of permission for its Special Economic Zone (SEZ) unit for defence manufacturing in Bengaluru and said that the unit is likely to start operations by the end of this month.

It is important for the company to be granted an extension for the letter of permission, which lapsed on March 7, as then it can aim at operationalising the unit in the KIADB Aerospace SEZ, Bengaluru, by the month-end before the sunset clause on direct tax exemptions sets in.

The Development Commissioner of the Cochin SEZ, who supervises the KIADB Aerospace SEZ, has recommended that a two-month extension of letter of permission till April 30, 2020 be granted, as per the agenda of the meeting. The Board of Approval (BoA) for SEZs, which is scheduled to meet on March 20, will consider the company’s request.

“Only SEZ units that are operationalised before March 31, 2020 will get the benefit of direct tax sops if the government does not extend the SEZ sunset clause that is scheduled to set in at the end of the current month. Tata Power has to meet the deadline for its unit to be eligible for direct tax benefits,” a government official told BusinessLine.

Tata Power, in its submission, said that it hoped to operationalise the SEZ unit by March 25, 2020. The Letter of Approval for the unit was given in March 2014. Operation of the unit got delayed because of plans of consolidating defence products manufacturing entities across Tata group, the company said, adding that some permissions were pending with the Defence Ministry.

The company has already made an incremental investment of ₹51.75 crore in the unit and building and material procurement was 100 per cent complete, the submission pointed out.

If the BoA gives an extension to the letter of permission and the company is able to operationalise the unit on time, it will be entitled to 100 per cent income tax exemption on its export income for the first five years, 50 per cent for next five years thereafter and 50 per cent of the ploughed back export profit for next five years.

So far, the Finance Ministry has not responded positively to the Commerce Ministry’s submission that setting in of the sunset clause on direct taxes for SEZ units should be delayed by some years to attract more investments into the SEZs.

Published on March 18, 2020
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