The Finance Ministry is unlikely to relent on the issue of continuing income-tax sops for special economic zones (SEZ) as proposed in the revised draft of Direct Tax Code (DTC), despite assurance by the Commerce Ministry that the ‘interests of SEZ investors will be protected'.

The revised tax code does not envisage continuation of income-tax concessions for units that may be set up after the end of the current financial year — April 1, 2011.

Commerce and Industry Minister Anand Sharma had met Finance Minister Pranab Mukherjee last week to discuss the issue. Officials in the Finance Ministry indicated that the Ministry was not inclined to concede the request of the Commerce Ministry for extension of sops for a number of reasons.

On its part, the Commerce Ministry is convinced that the SEZ scheme has been a success and they have attracted investment worth Rs.1.50 lakh crore, direct employment to over five lakh people and exports of about Rs.2.20 lakh crore in 2009-10.

Officials said the Finance Ministry has been much concerned over the revenue loss being incurred by extending tax sops to such units. The Direct Tax Code proposals make it clear that the Finance Ministry is convinced that it is time to check further proliferation of SEZs.

The draft has clarified that SEZ developers and units that start operations before the DTC is implemented on April 1, 2011, will continue to get tax exemptions on profits for the remaining years of the exemption period, the rules would be different for SEZs and units that come up after that.

Keywords: Finance MinistryDTCSEZ

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