Muted response to projects disheartens SEZ developers
New Delhi: Special economic zones are yet to get the boost as 37 developers—including Tata Consultancy Services and Parsvnath SEZ Ltd—have sought more time from the government for implementing their projects.
DLF Commercial Developers, Navi Mumbai SEZ and Raheja SEZ Ltd have also requested additional time for project implementation from the Board of Approval (BoA), headed by Commerce Secretary Rahul Khullar, as per an agenda note for the BoA's forthcoming meeting.
The BoA, a 19-member inter-ministerial body that deals with special economic zone (SEZ)-related matters, is scheduled to meet on 9 September.
Another four promoters have approached the Commerce Ministry for surrendering their projects, citing reasons like the imposition of minimum alternate tax and a lack of response from infrastructure developers.
Maharashtra Industrial Development Corp. has approached the BoA for surrendering its sector-specific tax-free enclave for agro-processing at Akola, in Maharashtra, the agenda note said.
Similarly, Vivo Biotech Ltd has requested the de-notification of its entire SEZ area, stating that "it has been extremely difficult for the company to get new units in the SEZ because of the macroeconomic downtrend".
According to an industry expert, uncertainty over the tax exemptions for new SEZs has also led to declining interest in the tax-free enclaves. Investors are very apprehensive about the new draft Direct Taxes Code (DTC).
According to the revised DTC draft, which will replace the Income Tax Act of 1961, tax exemptions for SEZs will be confined to already existing units.
The developers who have sought more time to implement their projects include Wockhardt Infrastructure Development Ltd, Bangalore International Airport and Meditab Specialities Pvt Ltd.
In the last meeting of BoA, which was held on 22 July, as many as 45 SEZ developers were given more time to execute their projects.
The board will also take up three applications for setting up new zones.
Under the SEZ Act, SEZ units get 100 per cent tax exemption on profits earned for the first five years, a 50 per cent exemption for the next five years and another 50 per cent exemption on re-invested profits in the following five years.
SEZ developers, on the other hand, get 100 per cent tax exemption on profits for 10 years, which they can choose to invoke within the first 15 years of operation.
Merchandise exports from the 143 operational SEZs in the country totalled Rs 72,255 crore in the April-June period, an increase of 23 percent vis-a-vis the same period last year.
In 2010-11, exports from SEZs jumped by 43 percent to Rs 3.15 lakh crore from Rs 2.20 lakh crore in the previous fiscal.
The government has cancelled Adani Group's special economic zone in Mundra (Gujarat) for alleged violation of three SEZ rules.
The government may have to amend the SEZ Act 2005 to align it with the Goods and Services Tax (GST) law so that central excise and service tax benefits can be extended to developers and entrepreneurs.