Of vision, growth pangs and solutions

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Monday , February 11, 2008 at 2235 hrs really add any significant value to the exchequer, should be abolished. On the whole, the government should simplify the structure and take corporate tax through a single window, even if it means revising the rate marginally to compensate.

Among other required reforms, education cess and surcharge should be consolidated to harmonise excise duty, and STP benefits should be extended beyond 2009 to bring them on a par with SEZ benefits.

One of our greatest needs today is to build world-class infrastructure with a vision and do it fast. The infrastructure investment should be doubled from the current 5% to at least 10%. For the power sector, it is now critical to address the challenges and populism must give way to pragmatism in order to ensure basic viability. We have covered early ground on encouraging private participation but need to do a lot more to bring in adequate funding. Special treatment could be considered for instance on Cenvat for the sector across generation, transmission and distribution projects, regardless of size.

—The author is MD, ABB India

SEZ

Nitin Baijal & Abhay Sharma
The SEZ legislation, introduced with much fanfare, has often been touted as one of the primary vehicles of economic growth in India. The idea behind the legislation is to catalyse growth of quality infrastructure, industry and job opportunities by offering tax incentives to those who develop SEZs as well as to those who set up units in these SEZs. But impediments and a variety of issues have resulted in only a portion of the potential of SEZs being tapped.

One such issue being faced by most corporate tax payers that have SEZ units is the calculation of the exemptions on the profits of SEZs under the Income Tax Act, 1961. Under Section 10AA of the IT Act, the exemptions are equal to profits of an SEZ unit x the export turnover of that unit. As regards the interpretation of the term, ‘total turnover of the business of the assessee’, there exists confusion.

The revenue authorities say that the total turnover of the businesses of assessees includes the turnover of not only SEZs unit but also of the entire businesses of the assessees. On the other hand, assessees feel that only the total turnover of SEZ units be included for calculation purposes. So, the revenue approach seems prejudicial to those whose businesses are not solely conducted via SEZs.