Budget 2014: Exporters Body Asks Finance Minister to Roll Back MAT from SEZs

Export promotion body for special economic zones has asked the Finance Minister to roll back the minimum alternate tax (MAT) on SEZs saying that the move will boost overseas shipments as well as domestic manufacturing.

In its pre-Budget consultations with Finance Minister Arun Jaitley, the Export Promotion Council for EOUs & SEZs (EPCES) said: "MAT on SEZs should be exempted. If not feasible at least reduce it to 7.5 per cent, exemption may be provided from Dividend Distribution Tax to SEZ developers."

MAT and the dividend distribution tax on SEZs have dented the investor friendly image of these special zones.

In 2011, government had imposed 18.5 per cent MAT on the book profits of special economic zone developers and units. Although government last year announced an incentive package to revive these zones, several developers are surrendering their projects due to the imposition of taxes.

"In order to offer long term and stable economic policy and to attract investment, SEZ Act & Rules should not be altered by any other Act or Rule," EPCES said in a statement today.

EPCES also urged the Finance Minister at the meeting last week to extend the export benefits available to the domestic exporters such as focus product scheme to SEZ units.

For gems and Jewellery trading units situated within the zones, it asked to permit import for distribution to the users within the zone.

"Currently, trading of precious metals or articles is not allowed," it said, adding the government should also exempt SEZs from service tax.

SEZs, which are major export hubs, contribute about one- third to the country's total exports. They provide employment to about 15 lakhs people.

Of 566 formally approved SEZs, only 185 are in operation. Exports from these zones increased from Rs 22,840 crore in 2005-06 to Rs 4.94 lakh crore in 2013-14.