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Govt may take decision on MAT, DDT on SEZs in Budget

Rajeev Kher, Secretary, Department of Commerce

The long-pending demand of the  industry for removal of minimum alternate tax and dividend distribution tax on SEZs is expected to be addressed in the upcoming Budget, Commerce Secretary Rajeev Kher said today.

“MAT (minimum alternate tax) and DDT (dividend distribution tax), you will definitely see something on February 28 … There will be a decision,” Kher said at a FICCI function here.

The government is taking measures to revive investors interest in the special economic zones (SEZs), he said. “In SEZs, there is a lot to be done. MAT and DDT are just one aspect but very important aspect. MAT and DDT is an issue which needs to be addressed through budget process…,” he added.

The official said that a decision has been taken on the dual use of infrastructure in non-processing areas of such zones and it will soon be notified. Kher also said that issues related to service tax and simplification of procedures would be resolved before the new Budget.

“Dual use of infrastructure in non-processing area…it is going to be notified. We have reached a decision. This is a clear indicator of the fact that we are talking in terms of optimising infrastructure which is created in SEZs,” he said.

He added that there is a need to address the issue of SEZ and domestic tariff area (DTA). “We need to look at this in a much more comprehensive manner … DTA and SEZ convergence has to be addressed. We are hoping that in the next few months, we will be in a position to offer that solution,” the secretary said. Industry is demanding that fiscal incentives availed by SEZ units should be extended to players outside those zones (i.e DTA). These zones enjoy income tax benefits among others.

SEZs play a significant role and contribute about 25 per cent to the country’s total exports. Investments in SEZs, which are major export hubs, started coming down after imposition of MAT and DDT.

The industry has been complaining that MAT and DDT have dented the investor sentiment and also implementation of the scheme. In 2011, government imposed 18.5 per cent MAT on the book profits of special economic zone developers and units. Exports from these zones increased from Rs 22,840 crore in 2005-06 to Rs 4.94 lakh crore in 2013-14.

On the issue of differences between finance and commerce ministries on SEZs, Kher said: “Relation between the department of commerce and revenue very often used to be very adversarial but now I get more letters from Revenue Secretary promoting SEZs rather than my writing to him”.

As on December 17, formal approvals have been given to 491 special economic zones. Out of this, 352 are notified and 196 are operational.

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