The Commerce Ministry has made a strong pitch for restoration of tax benefits to special economic zones and removal of import restrictions on gold in the forthcoming Budget for fiscal 2014-15.

“We have been talking to the Finance Ministry for withdrawal of the minimum alternate tax and dividend distribution tax on SEZs and restoration of the situation as it was,” Commerce Secretary Rajeev Kher said at a press conference on Wednesday.

The Commerce Ministry is also in favour of bringing down import duties on gold and restoring normalcy in import procedures, since the current account deficit is much lower now compared to last year, the Secretary added.

Normalising the methodology of operating the controversial 80:20 scheme of gold imports and bringing down import duties could be part of this year’s Budget, Kher said.

On the need for withdrawing MAT and DDT on SEZs, the Secretary said that various studies had shown that the imposition of taxes had hindered SEZs from acting as a tool for industrial development and increasing exports.

The Finance Ministry, in the Budget for fiscal 2011-12, decided to introduce a Minimum Alternate Tax of 18.5 per cent and a Dividend Distribution Tax of 10 per cent on the zones putting an end to the tax holiday provided for in the SEZ policy.

The SEZ Act passed in 2005 promised units a five-year complete tax holiday on profits, followed by 50 per cent exemption on profits over the next five years. Developers are promised a tax holiday for 10 consecutive years that they can choose in a bracket of 15 years

The Finance Ministry had argued that the complete tax exemption was a big drain on the exchequer, but the withdrawal of tax benefits resulted in a drastic drop in investments into the zones.

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