Amiti Sen, New Delhi
The Economic Times
Units in special economic zones (SEZs) can breathe easy at least for the time being. The UPA government is unlikely to impose a minimum alternate tax on SEZ units - a proposal mooted by the finance ministry during the current fiscal. Sources said that a resolution on MAT will not be taken up by the government before the general elections. The decision of whether SEZ units should be made to shell out some tax in the first five years of promised tax-free existence will now vest with the new government.
Sources in the commerce department said it was more or less decided by the empowered group of ministers (eGoM) on SEZs not to push the issue of imposing a 12.5% MAT on SEZ units before the elections. The decision to impose MAT will affect hundreds of SEZ units who have been operating under the assumption that they will not have to pay any taxes on profits in the initial years of operation. The eGoM, therefore, does not want to take a hurried decision on the issue, an official said. Industry sources pointed out that a decision to tax SEZ units would be a widely unpopular move which the UPA government does not want to make just before the elections. Since the global economic turmoil has already started taking its toll on the Indian stock market and exports, the government seems to be careful about not taking a decision which could make the going tougher for industry.
The finance ministry, which had imposed MAT on 100% export oriented units (EoUs) last year, had been pushing hard for imposing a similar tax on SEZ units. As per the existing SEZ Act, SEZ units which start manufacturing or producing articles or providing services on or after April 1, 2005, are eligible for a deduction of 100% of export profits for the first five years from the year in which such manufacture or provision of services begins. Deduction is allowed for 50% of export profits for the next five years while for the following five years, units get up to 50% deduction on reinvested profits. The commerce department says that an imposition of MAT would amount to a breach of promise made to investors who had put in money in the zones.
The eGoM on SEZs, however, does not seem to have a sympathetic disposition on another tax-related issue the review of section 10AA(7) of the Income Tax Act. If the section is not amended, it could result in certain IT companies like Infosys, who have established SEZ units as part of the parent company, getting only partial tax exemption on profits instead of 100% relief. Since the issue is fairly complicated and affects only a handful of IT companies, the eGoM is taking long to take a decision on it, a source said.
0 comments:
Post a Comment