Commerce ministry wants SEZ sops to stay

Anticipating a "political decision" on the review of tax concessions for special economic zones, the commerce ministry has tried hard to convince the empowered Group of Ministers (EGoM), headed by External Affairs Minister Pranab Mukherjee, on the continued need for sops.

Putting up a strong case for tax concessions, the commerce ministry, in its presentation to the EGoM at the meeting earlier this week, pointed out that corporate tax concessions are available to units under the zones only on their export income.

For any sales in the domestic tariff area, 100 per cent duty and taxes as per import tariff have to be paid as per the rules.

The ministry's presentation also pointed out that tax concessions for manufacturing and service units are similar to the ones already given to units in 100 per cent Export Oriented Units and Software Technology Parks till 2009.

More over, the ministry is of the view that without tax concessions, no developer may come forward to invest over Rs 2,500 crore in multi-product SEZs without assured time frame for returns. The presentation added that similar tax benefits already exist for developers of non-SEZ projects for the past 10 years.

Giving an overseas perspective, the commerce ministry pointed out the scenario in China where SEZs enjoy tax concessions even after two years of the units turning profitable and are charged a corporate tax of around 15 per cent, while in India, the rate is around 30 to 33 per cent.

More over, in Ireland, a low corporate tax to the tune of 10 per cent resulted in large FDI inflows into that country, which, in 2005, ranked seventh in terms of in-bound projects.