The commerce ministry on Wednesday said it is in the process of identifying reasons for slowdown in the Special Economic Zones (SEZ) sector, but added that it has asked the finance ministry to consider measures to ensure greater investment and employment generation in these enclaves. This is also with a view to boost exports from SEZs.
The commerce ministry in a statement on Wednesday said it has taken up with the finance ministry the issues raised by the SEZ developers and units including removal or reduction of Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) on SEZs .
The ministry also informed that they have voiced their opposition against a proposal considered by the finance ministry for abolition of all direct tax benefits for SEZs not operationalised before April, 2017. Finance ministry has been asked to extend the Sunset Clause (provision relating to the expiry of the benefits to SEZs) on SEZs up to 2023.
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This follows a meeting that the commerce minister Nirmala Sitharaman held on Tuesday with a delegation of Export Promotion Council for export oriented units and SEZs (EPCES).
Opposing the proposal that was being considered by the Central Board of Direct Taxes for abolition of all direct tax benefits for SEZs not operationalised before April, 2017, EPCES said it would create uncertainty in the minds of investors and lead to an increase in the number of applications for de-notification of approved SEZs. The commerce ministry said Sitharaman informed that the issue has already been taken up with Finance Minister Arun Jaitley, adding that IT/ITeS industry body Nasscom has also taken up this issue.
The imposition of MAT and DDT on SEZs has led to a slowdown in terms of growth in exports from these enclaves, reduced number of SEZ notifications, slower operationalisation of SEZs and increased number of applications for de-notification of approved SEZs, EPCES said. It has also dented the investor friendly image of SEZs, created uncertainty in the minds of foreign and domestic investors, EPCES said, adding that MAT should be totally withdrawn or reduced to its original rate of 7.5 per cent.
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The EPCES also wanted SEZ units to be allowed to sell in the domestic tariff area (DTA or domestic market) by shelling out the same duty applicable to imports from nations who are free trade agreement (FTA) partners of India. Since SEZs are duty/tax free enclaves, they have to pay regular duties for sales in the domestic market, which in turn makes their items costlier as compared to imports from FTA partner nations that enter India at zero or lower than regular duties, they said. Sitharaman assured the delegation that this matter will be looked into, the statement said.
The delegation comprised of senior representatives of Reliance Industries Jamnagar SEZ, Adani Port & SEZ, Tata Steel SEZ, DLF Ltd., Serum Institute of India Ltd, P.P. Jewellers, Phoenix Infocity, J. Matadee Free Trade Zone, ION Kharadi – Panchshil Group.