Modi to meet govt officials today for SEZ revival

Seeking to revive the beleaguered Special Economic Zones, Prime Minister Narendra Modi will hold a meeting of the officials of commerce and finance ministries on Saturday to sort out taxation and other problems hampering the implementation of the scheme.

The meeting, sources said, will be attended by Commerce Secretary Rajeev Kher and Revenue Secretary Rajiv Takru. "Issues such as impact of minimum alternate tax (MAT) and dividend distribution tax (DDT) on SEZs; issues of conflict between the revenue and commerce departments will come up for discussion," a source said.

Besides other things, the issues concerning inter- ministerial differences, especially between the finance and the commerce ministries over tax sops and loss of revenue are also likely to come for scrutiny at the meeting.

Extension of export benefit schemes available to domestic exporters such as focus product scheme to SEZ units are also likely to be discussed in the meeting at the highest level.

The meeting assumes significance as the country's exports and manufacturing are not growing at healthy rates and SEZs can play an important role in boosting both exports and manufacturing besides generating jobs. Of the 566 formally approved SEZs, only 185 are in operation

The commerce ministry has already asked its finance counterpart to roll back the minimum alternate tax (MAT) imposed on SEZs, saying that the levy has "suppressed" the potential of these zones as a tool to promote exports and generate employment.

SEZs, which are major export hubs, contribute about one- third to the country's total exports. They provide employment to about 15 lakh persons.

The industry too has been complaining that MAT and the dividend distribution tax (DDT) on SEZs have dented the investor sentiment and also implementation of the scheme. In 2011, government had imposed 18.5 per cent MAT on the book profits of special economic zone developers and units.

Although government last year announced an incentive package to revive these zones, several developers are surrendering their projects as imposition of taxes has eliminated the incentives for setting up SEZs and units in those zones.

Exports from these zones increased from Rs 22,840 crore in 2005-06 to Rs 4.94 lakh crore in 2013-14. Export Promotion Council for EOUs & SEZs (EPCES) has said that MAT on SEZs should be exempted or at least reduced to 7.5 per cent.

The commerce ministry is struggling to increase exports as the country's shipments in the last three years have been hovering around $300 billion.

India's exports in 2013-14 fell short of the $325 billion target and managed to touch $312.35 billion. The country's exports stood at $300.4 billion in 2012-13 and $307 billion in 2011-12.