The Direct Taxes Code (DTC) Bill, which was introduced in Parliament on Monday, offered a reprieve to special economic zones (SEZs) — at least till 2014. It, however, proposes to impose a 20 per cent Minimum Alternate Tax (MAT) on duty-free enclaves, a move likely to make India Inc
uneasy.
At present, SEZs enjoy income tax holidays on the principle that location-based exemptions promote regional development.
Under the present regime,
SEZ units get 100 per cent tax exemption on profits earned for the first five years, 50 per cent for the next five years and another 50 per cent on re-invested profits in the following five years.
SEZ developers, on the other hand, get 100 per cent tax exemption on profits for ten years, which they can choose in the block of the first fifteen years.
In the Bill, the government has proposed that deduction under section 10AA of the repealed Income-tax Act shall continue to be allowed under DTC.
However, this is conditional upon the fact that SEZ units should begin to manufacture or produce articles in zone on or before March 31, 2014.
For existing units set up under the repealed Income-tax Act, deduction would be allowed only for the un-expired period.
"SEZ developers and units operating in SEZs are also included under the MAT regime," said Sunil Shah of Partner Deloitte Haskins & Sells.
Source : hindustantimes.com