Reducing the tax burden on SEZs will attract investors
The pre-budget economic survey which was presented in the Parliament reiterated the need to promote structural changes in manufacturing in the medium term. There was a tremendous slowdown witnessed by the industrial sector which had negatively impacted the GDP of the nation, needs robust mechanisms for revival.
Reviving private sector investments to spur growth in manufacturing can be one of the options which can be considered. According to the survey, the Indian industry has immense potential for further strengthening agro-processing, textiles and garments, leather and footwear sectors. These sectors have a potential to generate regular employment and growth opportunities for the youth of the nation.
But, the medium term challenge for Indian manufacturing is to move from lower to higher-tech sectors, from lower to higher value added sectors, and from lower to higher productivity sectors.
The SEZ Act passed in 2006 assured investors of a tax free regime. However that faith was shaken when MAT (Minimum alternate tax) and DDT (dividend distribution tax) were introduced and now the investors are not sure about a stable tax regime. Investments in SEZs, especially in the manufacturing sector, have reduced drastically after MAT was introduced.
RavindraSannareddy the CMD, SriCity, a multi-product SEZ near Chennai stated that if the faith of investors is not restored in the current budget, then reviving SEZs would be almost impossible. SEZs are already reeling under the pressure of low occupancy levels and slow growth. The government needs to make changes in the policies to boost the manufacturing sector.
Source- Financial Chronicle
economic survey, Economic Survey for 2013-14, Minimum Alternate Tax, Minimum Alternate Tax (MAT), SEZ, Special Economic Zone (SEZ) policy, Special Economic Zones (SEZ)
