Finance minister Pranab Mukherjee has given corporate India a very big incentive to move into SEZs. He has allowed companies to keep the tax rebate earned on exports from SEZs separate from a similar rebate earned from units in domestic tariff areas (DTAs)?the rest of the country. This will benefit large IT companies like TCS, Wipro, Infosys and HCL as they would not need to set up separate companies for units running in different tax jurisdictions.
Mukherjee has promised to bring changes to Section 10AA of the Income Tax Act for this purpose. ?This has resulted in discriminatory treatment of assessees having units located both in SEZ and DTA vis-?-vis assessees having units located only within the SEZs.
It has now been decided to remove this anomaly through necessary changes in the Act,? he said in his speech in Parliament on Tuesday. IT companies running units in Software Technology Parks and SEZs will no longer have to set up separate shell companies, either. Until now, profits from an SEZ unit were exempt from tax in the same percentage as the unit?s contribution to the company?s turnover.
Export Promotion Council for EOUs & SEZs director-general LB Singhal cautiously welcomed the step, saying: ?SEZ units would still have to wait until an actual amendment is carried out.? It has been a three-year wait for those that wanted to invest in SEZ units for this provision to come through, after the SEZ Act was passed in 2005.
Infosys director, HR, TV Mohan Das Pai, said, ?With this change, the total profit from SEZ units will be totally tax-free. It will remove the tax liability and crystalise it removing a great ambiguity.? Added HCL Technologies executive VP Anil Chanana: ?This amendment will motivate more companies to move to SEZs.?