In a bid to revive the sagging fortunes of the special economic zones (SEZs), which have become unattractive for the industry after imposition of taxes, the Commerce Ministry will soon come out with new norms that could contain incentives to take things forward.
Ever since the Government imposed the Minimum Alternate Tax (MAT) and Dividend Distribution Tax on SEZs in 2010-11, they have lost their sheen and many corporate houses have backed out of their plans to set up SEZs. A number of them have either withdrawn their proposal or put their plans in abeyance waiting for the Government to come clear on the issue.
The government is considering relaxing the minimum land area requirement for different categories of SEZs, besides extending the benefits of export schemes to SEZ units which are already available to entities outside the zone. To boost investor confidence in the zones, the government is planning incentives for developers who want to set up SEZs in remote and undeveloped areas.
According to the Commerce Secretary, S.R. Rao, the Government is on the verge of completing all the inter-Ministerial negotiations on the issue and closure could be achieved within the next five to six weeks. “New rules would be put in place by early next month,” he added.
The Direct Taxes Codes (DTC), being considered by Parliament, proposes to do away with the income tax exemption given to them and instead link tax sops to investments made in them. Profit-linked benefits were the main attraction of the SEZ scheme. The initial phase of SEZ scheme, launched in 2006, saw developers lining up in big numbers for projects.
Exports from SEZs stood at Rs. 3.65 lakh crore in 2011-12. With investment of Rs. 2.02 crore, these zones provide employment to over 8.45 lakh. Overseas shipments from the 153 operational tax-free havens have come down to 12 per cent of the country's total exports in 2011-12, from about 30 per cent in the previous years.