Batting for the worried special economic zones (SEZs) developers who fear withdrawal of incentives in the new direct tax code, Commerce and Industry Minister Anand Sharma today said his ministry would ensure that the sops continue.
The Commerce Ministry has written to the Finance Ministry to retain all the fiscal incentives for the SEZs in the new direct tax code, for which draft paper has been circulated in the public domain.
"I have already written to the Finance Minister and we will be discussing it," Sharma said after the launch of a OECD Investment Policy Review report on India at a function jointly organised by industry body CII and the Department of Industrial Policy and Promotion.
Sharma said his ministry backs continuation of sops like income tax holiday for SEZs.
"We feel that those tax concessions which specifically meant for SEZs should continue," he said.
The draft direct tax code, that will lead to overhaul of the Income Tax Act, has created uncertainty among developers and units in the SEZs over continuation of the tax sops.
"We will ensure that investments in SEZs remain incetivised and attractive," the minister said.
The ministry has underscored the need for continuation of the tax-free enclaves, stating that fiscal sops are the main attractions for the promotion of SEZs.
While the discussion paper on the code says that the profit-linked and other incentives would remain applicable even after the new tax regime comes into effect, its explanation of "grand-fathering" the sops has created an apprehension among investors.
Under the SEZ Act, the units in these zones are given 100 per cent tax exemption on their income for the first five years and 50 per cent in the next five years. Another 50 per cent exemption is given on the ploughed-back profits for five years after 10 years.
As on September 30 this year, 578 SEZs have got formal approval, 147 'in-principle' approval, and 340 have been notified. Of these, 101 are functional. The total investment in SEZs was at Rs 1,29,985.52 crore till September.
The SEZs have attracted an investment of over Rs 1.10 lakh crore and exports from the units were valued at around Rs 1,00,000 crore in 2008-09.
