The Union commerce ministry will be taking a call on the taxation issues of SEZs under new DTC regime following a threadbare discussion in Parliament on Monday, said Rahul Khullar, commerce secretary, at a media briefing here.
?Let us wait for Parliament to discuss over the DTC on SEZs before taking our own course of action,? he said. As per the new Direct Tax Code (DTC) mandate, the minimum alternate tax (MAT) is hiked to 20% on book profits of units with further imposing of dividend distribution tax (DDT) on the SEZs that get operationalised after 31 March 2011.
Before the advent of DTC replacing the Income Tax Act of 1961, The SEZs are allowed to avail a 15-year tax holiday including the tax breaks under section 10 AA of Income Tax(IT) Act up to 100% in the first 5 years of inception, up to 50% in the next 5 years and 50% no tax on ploughed back export profits in the succeeding 5 years. The Union finance ministry considers the tax exemption to SEZs as distortionary promoting ?rent seeking? behaviour among business units in the SEZs with no intention to re-invest the profits in the infrastructure growth.
There are around 111 operational SEZs housing 1,800 units and employing 5.03 lakh people in the country. When Khullar was asked whether commerce ministry will take up the DTC tax implications on SEZs with the finance ministry, he said the complete picture will emerge following the outcome of parliamentary discussion. ?It is too premature to react on DTC implications on SEZ ahead of the parliamentary process?, he said.
Addressing media questions on lifting the ban on export of cottons, he said the government is planning allow cotton export with quantitative restrictions. ?We ar mooting to allow only the exportable surplus after holding a discussion with senior officials in the ministry of textiles, commerce and agriculture. We are further considering a prohibitive tax on volume of exports exceeding the set quantative limits say a rought 40 lakh bales. We are working on balance of interest among cotton growers, textile industry and exporters. The announcement would come after the meeting of officials on 1 October.?
On the high transaction costs hurting the competitiveness of Indian export, he said as it falls in the ambit of various ministries, the commerce ministry will work in close coordination with the ministries concerned to collate a document on cost anamolies on transaction hitting exporters.
