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Govt may more than halve MAT on SEZs

To cut minimum alternate tax rate to 7.5%; may announce in Budget

Nayanima Basu  |  New Delhi 

In what could be a major boost to India's (SEZs), the is set to reduce the (MAT) on (SEZ) from 18.5 per cent to 7.5 per cent. The move is expected to be announced in the for next financial year.

Since coming to power at the Centre in May, the Bharatiya Janata Party (BJP) -led has been vocal about boosting the country's SEZs, which have seen slow implementation after imposition of and (DDT) on the tax-free enclaves.


A decision on and DDT on SEZs was expected to be taken up during this year's Budget, tabled in Parliament in June. But no major measure was taken at that time because of "tight fiscal room". "It (MAT) will now be fixed at 7.5 per cent," a senior commerce department official told Business Standard.

Reducing the rate of MAT, an advance tax, will not require amending Section 10 AA of the income-tax Act. Even after introduction of MAT, exemption from income-tax continues for developers and units. So, the official did not rule out a reduction in the rate even before the next Union

Commerce Secretary Rajeev Kher had said at a recent Ficci meet that the would address the issue in the coming Budget, to be unveiled by Finance Minister Arun Jaitley towards the end of February.

The proposal had originally been mooted by the Export Promotion Council for EoUs (export-oriented units) and SEZs (EPCES). The council had said developers were made to pay at 18.5 per cent, plus cess; this came to almost 20 per cent.

"The slow implementation of SEZs can be attributed to introduction of MAT, at 18.5 per cent, plus cess. This is required to be adjusted within 10 years, failing which the surplus credit lapses. We have been making representations to the finance ministry, department of revenue and commerce ministry, citing that MAT, if paid, cannot be adjusted within 10 years," said EPCES Chairman P C Nambiar.

The proposal - to impose at 18.5 per cent on book profits of both developers and units in these enclaves - was announced in 2011-12 by the then finance minister, Pranab Mukherjee, under the previous regime. Besides, DDT at almost 20 per cent was also imposed for dividend distributed to shareholders.

came into effect from April 2012, amid severe protest from developers and units. It was introduced through a proposal in the Finance Act, even as the Act specifically mentioned a stipulated tax holiday to be given to these zones.

The is also going to soon announce dual usage of the land by allowing utilisation of the non-processing zones - where export activity does not take place - for the benefit of developers.

Meanwhile, the recently cancelled 67 formally approved SEZs. As a result, the total number of SEZs that had obtained formal approval came down to 491 - 352 of those are the notified ones. A total of 196 SEZs are operational at present.

GOVT'S EXPORT PUSH

MAT-hit
  • on SEZs took effect from Apr 2012, amid protest from developers & units
  • This was introduced through a proposal in the Finance Act, even as the Act specifically mentioned a stipulated tax holiday to be given to SEZs
  • Move to lower rate might be announced in the for next financial year
Out of the zone
  • Since coming to power at the Centre in May, the BJP-led govt has been vocal about boosting the country's SEZs, which have seen slow implementation after introduction of and dividend distribution tax
  • In 2013-14, exports from SEZs declined for the first time since inception - by 6.61% to $82.35 billion from $88.18 billion the previous year
Loss to exchequer
  • Tax concessions to SEZs are projected to have led to Rs 6,198 crore of revenue forgone in FY14, against Rs 4,491 crore the previous year

First Published: Mon, December 22 2014. 00:59 IST
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