Manufacturing SEZs may get a boost with the Government considering cutting the Minimum Alternate Tax on these special enclaves.
The idea, to be discussed by Commerce Department and Finance Ministry officials, is to revive investor interest in Special Economic Zones and boost sagging exports, a Commerce Department official told Business Line .
While the SEZ Act promised 100 per cent tax exemption for five years and 50 per cent exemption for the next five years, Budget 2011-12 imposed an 18.5 per cent MAT on SEZs. This drew widespread criticism from industry that viewed the levy as a breach of promise. New proposals for SEZs are down to a trickle and a large number of developers have withdrawn their proposals. SEZ developers were promised tax exemption for 10 years in a block of 15 years.
The Finance Ministry has been rejecting all attempts by the Commerce Department to lower the MAT — a levy imposed on entities exempt from paying tax. But with the current account deficit widening to worrying proportions, the Commerce Department’s proposal now stands a better chance of being accepted.
The proposal has been included in the agenda of next month’s foreign trade policy (FTP) review.
“We know that it may be difficult for the Finance Ministry to exempt SEZs across the board from paying MAT. That is why we are not pushing for a total exemption, but will be happy with a lowering of rates for at least those units that are engaged in manufacturing,” the official said.
The Export Promotion Council for EoUs and SEZs has been demanding that MAT be lowered to 7.5 per cent.
While the Commerce Department may initially settle for lowering the MAT rate to 15 per cent, it could insist on a steeper cut later, another official said.
It may also agree to restricting the benefit to manufacturing SEZs, maintaining status quo on IT and other services sectors. As the official said, “We hope to get the proposal to reduce MAT on SEZs approved this time, as the Finance Ministry itself is keen to incentivise exports.”
amiti.sen@thehindu.co.in