New tax code: Commerce ministry bats for SEZs

Commerce ministry has written to finance ministry to retain all the fiscal incentives for the special economic zones in the new direct tax code, for which draft paper has been circulated in the public domain.

"We have told them (finance ministry) to continue the SEZ benefits in the new tax code," a senior commerce ministry official said.

The ministry has underscored the need for continuation of the tax-free enclaves, stating that fiscal sops are the main attractions for the promotion of SEZs.

The draft direct tax code that will lead to the overhaul of the income tax act has created 'uncertainty' among the developers and units in the SEZs.

While the discussion paper on the code says the profit-linked and other incentives would remain applicable even after the new tax regime comes into effect, its explanation of 'grand-fathering' the sops has created an apprehension among investors.

The export promotion council for export oriented units and SEZs has also urged finance ministry to clarify how the developers and the units operating in these zones would continue to get tax benefits.

Under the SEZ act, the units in these zones are given 100 per cent tax exemption on their income for the first five years and 50 per cent in the next five years. Another 50 per cent exemption is given on the ploughed-back profits for five years after 10-years.

A total of 579 SEZs have been approved and 335 of them notified.

The SEZs have attracted an investment of over Rs 1.10 lakh crore (Rs 1.10 trillion) and exports from the units were valued at around Rs 100,000 crore (Rs 1,000 billion) in 2008-09.