The commerce ministry has made renewed attempt to get special economic zones (SEZ) exempted from the minimum alternate tax (MAT) and dividend distribution tax (DDT). It also wants SEZ manufacturing units to be given the benefit of a 3% interest subvention scheme for exporters.
In a meeting with finance minister Arun Jaitley this week, commerce minister Nirmala Sitharaman is learnt to have said these benefits should be given to ‘manufacturing’ SEZs from the ‘Make In India’ initiative perspective, with an aim to push manufacturing-led export growth. The commerce ministry’s demands follow a stakeholders’ consultation that it held with the SEZ sector earlier this month. An 18.5% MAT on SEZ developers and units and DDT on developers were imposed by the then finance minister Pranab Mukherjee in the FY12 budget after the revenue department raised concerns on the huge revenue losses due to exemptions given to SEZs. The department and the Comptroller and Auditor General (CAG) also had concerns regarding a majority of the SEZ units belonging to the IT/ITeS sector, and not enough from the manufacturing sector.
According to the Export Promotion Council for Export-oriented Units & SEZs (EPCES), the imposition of MAT/DDT on SEZs has dented the investor-friendly image of SEZs and created uncertainty in the minds of foreign and domestic investors. It added that the removal of MAT or its reduction — to its original rate of 7.5% (which, EPCES says, can be done through an executive notification) — will help in the growth of SEZs. The commerce and finance ministries are also looking into ways to ensure that units in SEZs are not hit by India’s free trade agreements (FTA) with different countries.