The Telegraph
Friday , June 13 , 2014
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Modi calls meet of commerce, finance ministry officials to sort out SEZ issues

New Delhi, Jun 13 (Agencies): Prime Minister Narendra Modi will hold a meeting of the officials of commerce and finance ministries on Saturday to sort out the taxation and other problems hampering the implementation of special economic zones or SEZs.

Of the 566 SEZs formally approved, only 185 are in operation. India had just 19 SEZs before the SEZ Act of 2005 came into effect the next year, attracting a flurry of proposals.

Many of the projects large, tax-free industrial estates—have run into protests from farmers and other landowners, and were seen as real estate deals.

Commerce Secretary Rajeev Kher and Revenue Secretary Rajiv Takru will be attending the meeting.

”Issues such as impact of imposition of MAT and DDT on SEZs; issues of conflict between revenue and commerce department will come up for discussion in the meeting,” a source told PTI, referring to minimum alternate tax and dividend distribution tax.

Inter- ministerial differences, especially between the finance and the commerce ministries, over tax incentives and loss of revenue are also likely to come for scrutiny at the meeting.

Extension of export benefit schemes available to domestic exporters such as focus product scheme to SEZ units are also likely to be discussed in the meeting at the highest level.

The meeting assumes significance as the country's exports and manufacturing are not growing at healthy rates and SEZs can play an important role in boosting both exports and manufacturing besides generating jobs.

The commerce ministry has already asked its finance counterpart to roll back the MAT imposed on SEZs, saying that the levy has “suppressed” the potential of these zones as a tool to promote exports and generate employment.

SEZs, which are major export hubs, contribute about one- third to the country's total exports. They provide employment to about 15 lakh persons.

The industry too has been complaining that that MAT and the DDT on SEZs have dented the investor sentiment and also implementation of the scheme.

In 2011, government had imposed 18.5 per cent MAT on the book profits of SEZ developers and units.

Although government last year announced an incentive package to revive these zones, several developers are surrendering their projects as imposition of taxes has eliminated the incentives for setting up SEZs and units in those zones.

Exports from these zones increased from Rs 22,840 crore in 2005-06 to Rs 4.94 lakh crore in 2013-14.

Export Promotion Council for EOUs & SEZs (EPCES) has said that MAT on SEZs should be exempted or at least reduced to 7.5 per cent.

The commerce ministry is struggling to increase exports as the country's shipments in the last three years have been hovering around $300 billion.

India's exports in 2013-14 fell short of the $325 billion target and just managed to reach $312.35 billion. The country's exports added up to $300.4 billion in 2012-13 and $307 billion in 2011-12.

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