A decision on the modification in tax structure for Special Economic Zones is underway, Commerce and Industry Minister Nirmala Sitharaman said on Wednesday assuring fulfilment of a long-term industry demand which was sidestepped in the Budget presented barely two-months ago.
“Decisions on modification of MAT (Minimum Alternate Tax) and DDT (Dividend Distribution Tax) are on cards to encourage SEZs,” said Sitharaman. SEZs started losing sheen after the imposition of MAT and DDT in 2011 on them.
Before the Budget presentation on July 10, industry had asked the government for a roll back of MAT on SEZs which, they argued, had suppressed the potential of SEZs as a tool to promote exports and generate employment.
The taxes were not rolled back but the Finance Minister Arun Jaitley had assured the industry that the government would take “effective steps” to make SEZs instruments of industrial production, economic growth, export promotion and employment generation.
Addressing a press conference, Sitharaman also said that a proposal for dual use of SEZ land was also under active consideration to help developers earn faster returns. “Other issues such as those relating to service tax, extending the tax holiday for the pharmaceutical industry and extension of Customs ICEGATE system to the SEZ framework, are being actively pursued,” she said.
One of the major criticism about the SEZ’s is that they have been hijacked by developers who corner huge swathes of rich, agricultural land with a measly compensation handed over to farmers. It has also been alleged that SEZs have also not contributed to exports in the recent times. However, Commerce Secretary Rajeev Kher said, even now, close to 25 per cent of exports are being done through SEZs.
Recently, the government had informed Parliament that exports from these zones increased from Rs 22,840 crore in 2005-06 to Rs 4.94 lakh crore in 2013-14.
SEZs also contribute about one-third to the country’s total exports. They provide employment to about 15 lakh persons, according to the reply to a Parliament question.
