Monday, August 17, 2009

SEZ units want tax sops with retrospective effect

Nayanima Basu
Financial Chronicle
The commerce and industry ministry has written a letter to the finance ministry urging that tax exemption provided under Section 10AA of the Income-tax Act be given retrospectively and not on a prospective basis to units located in special economic zones (SEZs). The issue has been hanging fire for over three years now and the move could trigger a fresh row between the two ministries.

Recognising the anomaly, the finance minister had said in February that it would be corrected as it had resulted in “discriminatory treatment of an assessee having units located both in SEZs and the domestic tariff area (DTA) vis-à-vis an assessee having units located only within SEZs.”

It has been proposed that the changes would be effective from April 1, 2010, whereas the companies have demanded that this be applicable retrospectively, from February 10, 2006, when the SEZ Act came into effect.

Due to this provision, companies, especially IT firms that have units in DTA are not getting any benefit as it limits the benefits of getting a tax exemption. IT biggies such as TCS, Infosys, Wipro and HCL are not able to avail the full benefit.

“Tax exemption has been categorically provided in the SEZ Act. Even though the anomaly had been removed, it should be done retrospectively, else the firms would not be able to get benefits,” said LB Singhal, director-general, export promotion council for EOUs and SEZs.

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