Two-year relief for SEZ units but no waiving of profit-linked tax

The finance ministry has stuck to its intent to do away with the profit-linked tax exemption regime for developers of special economic zones and units in these designated areas.

It has, however, given more time to units in the zones to come under the new tax regime.

The Bill has proposed that zones notified by the end of March 2012, will get income tax benefits.

For units, there is a two-year additional window, with those commencing operations by March 31, 2014, likely to get an exemption.

 In the second discussion paper, the finance ministry had suggested a cut-off of March 2011. Since then, implementation of DTC has been deferred by a year to April 2012.

So, units have actually managed to get a two-year relief.

The special economic zones have attracted an investment of about Rs 1.5 lakh crore (Rs 1.5 trillion).

Of the 578 approved SEZs, 111 are operational.

An SEZ is considered operational if at least one unit in it has started exporting.

At present, units in SEZs get 100 per cent income tax exemption on export income for the first five years and 50 per cent for the next five years.

They also get exemption on 50 per cent of the ploughed-back export profit for the next five years after the first 10 years. They are also exempted from minimum alternate tax.

However, once DTC is implemented, SEZ developers and units operating in the zones will be included under the MAT regime, where a 20 per cent tax on book profits is proposed.