Exports from special economic zones (SEZs), which grew 68 per cent in the first quarter of this fiscal, can fall if the direct taxes code’s suggestion to scrap benefits materialise.
“It is unlikely that exports will continue to register such growth figures in the years to come. The slowdown has already set in because of uncertainty in DTC,” a senior commerce ministry official said.
The government had tabled the direct tax code (DTC) bill in Parliament on August 30.
Exports from SEZs rose 68 per cent during April-June to Rs 58,685.46 crore over the year-ago period. In 2009-10, exports had grown 121.40 per cent to Rs 220,711.39 crore from Rs 99,689 crore a year ago.
Officials said, “SEZ incentives had attracted global majors such as Nokia and others to set up plants in the country. The developers and investors will now look at the options available globally as the major incentive will not be there in the proposed DTC.”
IT accounts for 60 per cent of the operational SEZs but make up for only 18 per cent of exports. Exports from 114 operational SEZs in the last fiscal were valued at Rs 2.20 lakh crore. Reliance Petroleum’s
SEZ refinery contributed Rs 70,000 crore. Total exports from all the 69 IT SEZs were around Rs 40,000 crore.
SEZ units are given 100 per cent exemption for the first five years, 50 per cent for the next five and 50 per cent on the ploughed back export profit for the next five years under Section 10 AA of the income tax act. They are also exempted from minimum alternate tax (MAT), central sales tax, service tax and state taxes.
The DTC bill proposes to replace the profit-linked exemptions with rebate for investments (investment-linked exemptions) by both the developers and units. The bill also proposes to charge MAT at 20 per cent on the units inside SEZs.
The bill has proposed the the continuation of the 15-year tax holiday for units which will be operational by March 31, 2014.
Source : telegraphindia.com