Centre should think about the SEZs
The Centre should refrain from restoring tax benefits to units in Special Economic Zones (SEZs) and developers of these enclaves that were withdrawn in the 2011-12 Budget. SEZ units and developers now incur a 20 percent minimum alternate tax (MAT) on their book profits. In addition, there is a 15 percent dividend distribution tax (DDT) that is levied on developers.
True, exemption from these taxes was an incentive for attracting investments into SEZs under a policy unveiled in 2006. This policy granted units in SEZs full waiver of import duty, excise and service tax on inputs procured by them, besides 100 percent income tax exemption on exports for the first five years and 50 percent for the subsequent five years.
The latter benefits were significantly diluted by the introduction of MAT/DDT. As a result, the SEZ units/developers do have a point when they claim there was a reneging on policy commitments based on which they had made investment decisions.
The tax benefits to the SEZs will help the developers and to enhance the smooth run of these SEZs. The government has still not stated anything on what they are thinking about the tax benefits on the SEZs.
Source: Hindu Business Line
