Exemptions for new units may go after DTC is in place, several other developers also opting out
Several realty firms, including Parsvnath, have sought the government's nod to shelve their special economic zone (SEZ) projects amid continued tax uncertainties.
Among others, Parsvnath SEZ -- a Parsvnath Group subsidiary -- has offered to surrender six SEZs -- in Uttar Pradesh, Rajasthan, Haryana, Tamil Nadu and Maharashtra -- that had earlier been granted in-principle approval by the government.
"The developer has requested for withdrawal of in-principle approval, citing economic (in realty market) slowdown, Direct Tax Code (DTC), imposition of minimum alternate tax (MAT) as the reason for the same," an official in the Commerce Ministry said.
Parsvnaths' request for pulling out from the SEZ projects and other applications will come up before the inter-ministerial Board of Approval (BoA), which is scheduled to meet on July 22.
Besides Parsvnath, other developers that want to exit from their SEZ projects include Juventus Builders and Developers, Alok Infrastructure, Oval Developers, Airmid Developers and NG Realty.
Parsvnath had got in-principle approval for leather and handicrafts SEZs at Agra and Moradabad, respectively, a gems and jewellery tax-free zone in Jaipur, a food processing SEZ in Sonepat, an auto component zone in Pune and a multi-product SEZ in Kanceepuram.
The draft DTC has proposed withdrawal of exemptions for new units that come up after the tax code is implemented and replacement of tax exemption on profits for developers with sops on investments.
The DTC is expected to implemented from the next fiscal.
The industry has also expressed concern over the imposition of Minimum Alternate Tax (MAT) of 18.5% on the book profits of SEZ developers and units.
Under the SEZ Act, SEZ units get 100% tax exemption on profits earned for the first five years, a 50% exemption for the next five years and another 50% exemption on re-invested profits in the following five years.
SEZ developers, on the other hand, get 100% tax exemption on profits for ten years, which they can choose in the block of the first fifteen years.
Five developers have approached the BoA to de-notify their tax-free enclaves.
In addition, as many as 45 SEZ developers, including Raheja SEZ, Navi Mumbai and GP Realtors, have sought more time to execute their projects.
SEZs in India have emerged as manufacturing and export bases.
Meanwhile, two developers -- Radiant Corporation and Anique Infrastructure -- have requested permission to set up new tax-free enclaves in Andhra Pradesh and Gujarat, respectively.
Exports from SEZs increased by 43% to Rs 3,15,868 crore in 2010-11 vis-a-vis the same period of the previous fiscal. A total of 6.76 crore jobs were also generated.
