Commerce Ministry seeks withdrawal of MAT, DDT on SEZ in Budget

This has been requested given the slow growth rate in exports and investments, says ministry official

The Commerce Ministry has sought a re-look at the taxation regime for the special economic zones (SEZs) in the forthcoming Budget to boost exports and investments.

"In its Budget proposal, the Commerce Ministry wants the Finance Minister to discontinue minimum alternate tax (MAT) and dividend distribution tax (DDT) imposed on SEZ units and developers respectively," a senior official said.

Earlier too, the Commerce and Industry had recommended the restoration of original exemption from MAT and DDT to SEZ developers and units. But the Finance Ministry has rejected that.

The official said that given the slow growth rate in exports and investments, "we have asked the Finance Minister to take re-look on the issue".

SEZs, which contribute about 25% of the country's total exports, are facing problems after imposition of these taxes in 2011. The industry wants withdrawal of these taxes to revive investments sentiments.

Over 50 developers have already surrendered their projects and another 57 have approached the government requesting for de-notification of their projects. Many have cited the reason of change in tax regime for surrendering their projects.

India's trade deficit declined to 10-month low of USD 9.43 billion in December mainly on account of falling imports due to slump in crude prices, though exports too have come down. Exports have entered the negative zone.

As of now, out of over 500 SEZs approved, only 196 are functional with maximum number of such zones in Tamil Nadu (36), followed by Maharashtra and Karnataka (25 each) and Telangana (24).

The Export Promotion Council for EoUs and SEZs (EPCES) has said that the minimum alternate tax and the dividend distribution tax on SEZs have dented the investor friendly image of these zones.

In 2011, the government had imposed MAT of 18.5 per cent on book profits of special economic zone developers and units.

During 2012-13, SEZs have attracted a total of Rs 2.36 lakh crore investment and provided direct employment opportunities to over 11 lakh people.