After a near 11% drop in 2014-15, exports from special economic zones (SEZs) shrank 3.3% to $70.81 billion in the last fiscal, official data showed, reports Banikinkar Pattanayak in New Delhi. This is the first time since 2012-13 — when the minimum alternate tax (MAT) on developers and units and a dividend distribution tax (DDT) on developers started to hit SEZs hard — that SEZs have outperformed the growth in overall merchandise exports. Importantly, the Jamnagar SEZ of Reliance Industries alone continues to account for roughly a fourth of the total exports by SEZs, suggesting that the overall performance of such designated enclaves still owes a lot to RIL.
Analysts say the seemingly better show put up by SEZs points at the fact they have worked hard on their business models, realising both the MAT and the DDT are here to stay, thanks to stubborn refusal by the revenue department in giving any concession on such taxes.
Also, a sizeable portion of the SEZ exports is from the services sector, which performed better in 2015-16 than the manufacturing sector, especially due to a global commodity price slump. As of September, of the 204 operational SEZs in the country, 116 were in the IT/IT3S, electronic hardware, and semiconductor segments, although it’s not clear from the latest official data as to how much of the SEZ exports were accounted for by the services sector. However, analysts were categorical that SEZs could have performed even better had the government decided to scrap both the MAT and DDT.
The government had imposed MAT on SEZ developers and units and DDT on developers in 2011-12. Before the MAT and DDT were imposed, the growth in exports from SEZs was as high as 121% (2009-10) and 43% (2010-11), far exceeding the increase in the country’s overall goods exports for these years.
Currently, many of the SEZs are operating at 70% of their capacities due to subdued global demand and the imposition of the 18.5% MAT on SEZ developers and units and the DDT on such developers. Some SEZs have been forced to operate at even less than 60% of their capacities, industry officials said.