Commerce Ministry to approach cabinet over tax incentives to SEZs.

NEW DELHI: Irked by poor response of Finance Ministry, the Commerce Ministry has decided to take the issue of providing tax incentives to revive sagging special economic zones (SEZs) to the Cabinet.

"We have met Revenue Department officials several times, but things are not moving. The Commerce Ministry is determined to go to Cabinet. Cabinet will take the final decision on our proposals," a senior ministry official told PTI.

The SEZs have lost sheen following the decision of the Finance Ministry to gradually withdraw tax incentives and impose levies like Minimum Alternate Tax (MAT).

"Finance ministry has objections on most of the issues like reducing minimum area for SEZs and other proposed incentives," the official said.

On the back of increasing exports from the tax free enclaves, which are contributing about 30 per cent of the country's total exports, there is an urgent need to revive the SEZ policy, the official added.

Exports from SEZs increased to Rs 3.65 lakh crore in 2011-12 from Rs 2.20 lakh crore in 2009-10. With an investment of Rs 2.02 lakh crore, over 8,45,000 people have been employed in these zones.

The Commerce ministry has proposed relaxing minimum land area requirement for different categories of SEZs, besides extending the benefits of export schemes, that are already available to entities outside the zone, to these units.

The initial phase of SEZ scheme, launched in 2006, saw developers lining up in big numbers for projects.

But after imposition of Minimum Alternative Tax and Dividend Distribution Tax on SEZs in 2010-11, investors started developing cold feet as tax incentives were the major attraction for setting up of these enclaves.

Also, the Direct Taxes Codes, being considered by Parliament, proposes to do away with the income tax exemption given to them and instead link tax sops to investments made in them. Profit-linked benefits were the main attraction of the SEZ scheme.

Out of 389 notified SEZs, 153 are operational.

Source : economictimes.indiatimes.com