Commerce ministry officials believe Special Economic Zones (SEZs) have escaped revisions to the Direct Tax Code (DTC) relatively unscathed for now, this despite an end to duty-free investments in sight. The
SEZ scheme is now five-years old and, although its creators never pegged a shelf-life on SEZs upon its inception in 2005, ministry officials are calculating its viability beyond 2014 when nearly all investors will be subject to investment-based depreciation.
SEZ developers will remain averse to new taxes on their projects through March 2012, according to the DTC tabled before Parliament on Monday. “Investors had really expected to be safe only through 2011, but now 2010-11 is in the bag, as is 2011-12, so the DTC provides a bit of a reprieve; a unit in business two years ago has four clear years of zero liability,” commerce secretary Rahul Khullar told The Indian Express. “It looks like they will still have a lower tax liability, but the point is whether it will still be worth their while; manufacturers will still have a case, that much we know.”
Khullar will provide a recommendation to the Department of Revenue regarding the long-term feasibility of SEZs under the current DTC and the SEZ Act, 2005, which currently provides a 100 per cent tax exemption to SEZs over its first five years before scaling back to 50 per cent for the next five years. In his calculations, Khullar is trying to take the guess work out of long-term SEZ plans by weighing the financial impact of two more years of the tax-holiday, the implementation of a 20 per cent minimum alternate tax and the weight of DTCs investment-linked incentive scheme.
Source : indianexpress.com