Government plans tax sops for SEZs to boost flagging performance
In order to generate interest in investment in the India’s Special Economic Zones (SEZs), the government may exempt investors from paying the Minimum Alternate Tax (MAT) in the Budget FY15.
The commerce and finance ministries have held discussions after several years, in a bid to revive investor confidence. The commerce ministry has asked for various other tax sops as well. Currently, every company is liable to pay a MAT at the rate of 18.5 percent plus applicable surcharge and cess on book profits. The ministry also feels that MAT may have the unintended consequence of impairing capital formation in the economy, particularly SEZs, especially considering the high rate of capital formulation witnessed.
The Finance ministry would be unable to provide tax concessions as their performance is subject to WTO rules. Hence, the government is considering providing non-tax support as well, such as transport facilities for workers.
MAT had earlier been imposed on SEZs during FY12, despite making no change on the SEZ Act. This was a big reason for the slump in confidence in Indian investment and tax regime.
The commerce ministry has declared that MAT credits are unworkable, and no investor would like to set up a unit in the SEZ with the current scenario.
Source: The Indian Express
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