Uncertainty over tax exemptions to new special economic zones (SEZ) has prompted several developers to shelve their projects, including Oval Developers’ proposed enclave in Bengal.
“The developer has requested for the withdrawal of in-principle approval, citing economic slowdown (in the realty market), the Direct Tax Code (DTC) and the imposition of minimum alternate tax (MAT) as the reasons,” officials said.
Besides Oval Developers, others looking to exit
SEZ projects include Parsvnath, Juventus Builders and Developers, Alok Infrastructure, Airmid Developers and NG Realty.
Oval Developers planned to set up an SEZ for electronic hardware and software in South 24 Parganas district of Bengal.
The requests of the developers for withdrawal along with the new applications will come up before the inter-ministerial board of approval (BoA) scheduled to meet later this week. Oval Developers said in the application that the SEZ was notified in November 2007 over an area of 11.78 hectares.
The developer has now sought denotification of the tax-free zone on the grounds of very limited demand for SEZ space in electronic hardware and software. The developer also said there had been no construction in the proposed site and, therefore, they did not avail themselves of any duty benefit.
The draft DTC has proposed the withdrawal of exemptions for new units that come up after the tax code is implemented and the replacement of the relief on profits for developers with sops on investments. DTC is expected to be implemented from the next financial year.
According to Ajay Nijhawan, convenor of a panel of SEZ developers, the tax benefits cannot be changed without amending the SEZ Act. “The reason income tax provisions applicable to SEZs are enshrined in the SEZ Act is to ensure I-T does not unilaterally amend the I-T provisions on the matter,” Nijhawan said.
The industry has also expressed concern over the imposition of a minimum alternate tax of 18.5 per cent on the book profits of SEZ developers and units.
Source : telegraphindia.com