From ET Realty
NEW DELHI: The commerce department is once again trying to revitalize special economic zones (SEZs), many of which have surplus land at their disposal, and has pitched for removal of minimum alternate tax (MAT) as well as postponing the phase-out of tax exemptions in the budget.
When contacted, commerce and industry minister Nirmala Sitharaman confirmed the development and said, “We have had detailed discussions on this and a delegation of SEZs came and met me… Our intention is to make SEZs as vibrant as they can be. They should benefit from exports. They should also sometimes, if there is capacity for them, be able to do some work for domestic units, which want them to supplement their activities. A great degree of flexibility should be offered to units which are located in SEZs.”
Sources said that Sitharaman had raised the issue with finance minister Arun Jaitley before he left for Davos to attend the World Economic Forum’s annual meeting.
In its pre-budget proposal, the department is also learnt to have flagged the issue of providing some assistance to exports, especially those which are labour-intensive such as textiles, leather, footwear, auto parts and certain engineering goods. The commerce minister indicated that the proposals related to tackling the high cost of capital, which despite the 3% interest subsidy remained high by international standards, were also discussed. “Not every sector is equally affected. There are sectors which are holding out and coincidently these are sectors where labour-intensive work takes place. These sectors need to be given additional help so that they also don’t fall into red,” she told TOI.
Falling exports are a key policy headache for the Narendra Modi government, given that they have contracted for 13 months in a row and the global environment remains gloomy. In recent months, the rupee has weakened against the dollar but other currencies have depreciated more, resulting in the benefit not accruing to the exporters. In fact, apart from China, currencies such as the Thai baht or the Indonesian rupiah have depreciated more over the past 12 months.
In case of SEZs, Sitharaman has been pressing for easier policy dispensation ever since she took charge in 2014 but the revenue department bureaucracy has repeatedly blocked any relaxation. The revenue department, which felt left out due to the powers being vested with a board headed by the commerce secretary, had got then FM Pranab Mukherjee to amend the SEZ law and levy MAT as well as dividend distribution tax on SEZs. This was done despite the SEZ Act promising a tax holiday for a specified period. The commerce ministry is now trying to set right the rules for SEZs which accounted for exports of $80 billion.