Govt Eyes Rs 15k cr Via MAT on SEZs.

NEW DELHI: The government hopes to plug a potential revenue loss of Rs 15,000 crore by levying minimum alternate tax on developers of special economic zones and units that are located in these enclaves.

With tax benefits available under the Software Technology Park of India (STPI) scheme coming to an end, the government fears that several information technology units could relocate themselves in SEZs to avoid paying tax. Alternatively, IT zones would come up before the Direct Taxes Code, which had proposed to end the tax holiday, kicks in. Unlike a multi-product SEZ, the area requirement is much lower, helping cut down construction time. In the Budget, the government has proposed to levy 18.5% minimum alternate tax on SEZ units and developers. When asked, revenue secretary Sunil Mitra said the proposal had an implication of Rs 15,000 crore. "Profit linked incentives are resulting in shifting (of units) to SEZs," he added.

SEZs had originally been designed as duty-free enclaves to boost the manufacturing capability as also build world-class infrastructure. However, land acquisition issues and changes in the tax rules have held up several projects, affecting fresh investment. In the Budget papers, the government had estimated that the STPI scheme caused a Rs 11,500 crore revenue loss in 2010-11, which was 21% higher than the previous financial year.

The government's projection has pegged revenue foregone on tax incentives to SEZ units at Rs 5,126 crore, up from Rs 4,233 crore in FY10. "Across various sectors, deductions for STPs, Export-Oriented Undertakings, power and telecom sectors account for 13%, 4%, 10% and 5% of the total tax forgone, respectively," the Budget showed.

Source : infodriveindia.com