SEZs have the potential to revive exports, which have contracted for the twelfth month running. Global demand is weak, though the recent devaluation of the yuan could benefit exporters.
"Incentivising manufacturing in SEZs would help in the Make in India initiative and also boost exports. We have taken up the issue with the finance ministry and are hopeful that the budget would address the concerns," a senior commerce ministry official said.
The commerce ministry has pitched for the exemption of the 20-per- cent minimum alternate tax (MAT) on SEZs to make merchandise globally competitive.
The Finance Act, 2011 broadened the scope of MAT by bringing SEZ developers and units under its ambit, significantly diluting the benefits offered by the economic enclaves.
Finance minister Arun Jaitley in his budget speech for 2014-15 said that manufacturing was of paramount importance for the growth of the economy. He said the government was committed to revive SEZs and make them effective instruments of industrial production, economic growth, export promotion and employment generation.
Exemption from MAT is offered to certain individuals whose adjusted total income does not exceed Rs 20 lakh. The limit of Rs 20 lakh is inadequate considering the huge amount of investments made in the export sector.
The commerce ministry is also working on streamlining the SEZ policy to bring more clarity and improve the competitiveness of exporters in the global market, which is mired by a currency war and falling orders.
During April-November this fiscal, exports declined 18.46 per cent to $174.3 billion. Imports stood at $261.8 billion and the trade deficit was $87.5 billion.
The SEZ revival package is likely to include incentives to investors to make use of the land and other facilities lying idle in the existing zones.
Other sops may include removal/lowering of MAT and dividend distribution tax as well as the permission to SEZ units to sell in the domestic market by paying the same duty applicable to imports from countries with which India has a free trade agreement (FTA).
SEZs, which are tax-free enclaves, have to pay duties for sales in the domestic market. This make the products costlier compared with imports from FTA partner countries that come in at zero or lower-than- regular duties.
As on March 2015, India had 202 operational SEZs across the country, which contributed close to a fourth of overall exports at $310 billion. Although fiscal concessions and tax sops are allowed to SEZs under the SEZs act, the Centre continued with MAT for years.
The finance ministry has justified MAT by saying that the government was forgoing considerable revenues, which were estimated at Rs 26,534 crore in 2014-15.
Source :.telegraphindia.com
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