Leading developers across the country are likely to meet Finance Minister Pranab Mukherjee and top officials of his ministry on the continuation of tax benefits for special economic zones, or SEZs.
The developers, including Raheja Ltd, Ascendas, L&T and GMR, among others, are in the Ministry of Commerce and Industry’s Export Promotion Council for Export Oriented Units and Special Economic Zones (EPCES). They are likely to be part of the team that would meet the officials on the adverse effect of the tax provisions in the draft Direct Taxes Code (DTC) on the investments and exports from SEZs.
EPCES has already apprised the finance ministry on the adverse impact of the provisions recommended in the draft DTC, which was released last month.
Officials in the Ministry of Commerce and Industry have told Business Standard that the main agenda of the meeting would be to request the finance ministry to keep the SEZ Policy out of the purview of DTC.
“Discontinuation of the tax benefits would be completely contrary to the SEZ scheme,” said a senior commerce ministry official.
Developers are already queuing up in the Ministry of Commerce and Industry to surrender their projects citing various reasons from the global economic downturn to policy uncertainty, while many companies that had announced their SEZ plans are holding back their decision and investment plans.
“Global investors are looking at us only because we have world-class SEZs couple with attractive tax incentives. With this kind of a policy announcement, they have now started looking into other countries like Manila, Vietnam, Malaysia and Indonesia who are following our model and offering a plethora of tax incentives. Without SEZs, where else can one find the kind of infrastructure to develop exports?” averred Tapan Sangal, associate director at PricewaterhouseCoopers.
At present, there are 111 operational SEZs in the country having more than 1,800 units with 503,611 people employed in them. Till date, the Board of Approval has given formal nod to 575 SEZs, out of which 358 have been notified. According to the provisions in DTC, existing SEZ developers and units would also be subjected to pay the minimum alternate tax on their book profits, which will be a final tax. Under the current norms of Section 10 AA of the Income Tax Act, SEZs are given 100 per cent tax exemption for the first five years, 50 per cent for the next five years and 50 per cent of the ploughed back export profit for the next five years.
With reference to the statement that according to the provisions in DTC, existing SEZ developers and units would also be subjected to pay the minimum alternate tax (MAT) on their book profits, a relaxation may be made exclusively in the case of such units to the effect that the corporate dividend tax (CDT) actually paid would be adjusted towards MAT payable, subject also to an essential condition that no carry forward benefit would be applicable to the CDT actually paid, or payable. Such a relaxation would be beneficial to the shareholders also.
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Leading developers across the country are likely to meet Finance Minister Pranab Mukherjee and top officials of his ministry on the continuation of tax benefits for special economic zones, or SEZs.
