Assocham bats for stable tax policy, incentive scheme for SEZs SEZ India Invest
A stable tax policy coupled with constant availability of tax sops and incentives with a reasonable time frame is the most important factor concerning Special Economic Zone (SEZ) developers/co-developers and units, apex industry body Assocham said.
Anomalies in every budget vis-a-vis promised tax breaks and stimulus for SEZs might discourage investors owing to blemished implementation of originally intended legislation thereby hurting the credibility of the SEZ policy, said the Associated Chambers of Commerce and Industry of India (Assocham).
``Tax exemptions and related benefits for setting up SEZs were for a defined period highlighting the lack of government support to the tax policy concerning SEZs,`` said R.N. Dhoot, president, Assocham while submitting the chamber`s recommendations on SEZs to the Ministry of Commerce and Industry (SEZ division).
``There should be more clarity in this behalf and tax sops should be provided for an indefinite period as SEZs account for about 30% of India`s gross exports and play a pivotal role in providing employment opportunities, shoring up infrastructure and curbing migration,`` said Dhoot.
Assocham has also urged the government to do away with levies of 18.5% minimum alternate tax (MAT) imposed on SEZ developers, units and 15% dividend distribution tax on SEZ developers in union budget 2011-12 as it has raised serious concerns pertaining to stability of government`s tax policy on SEZs.
SEZ developers and investors are in a fix over doubts concerning stability of policy, more so on issues related to taxes and land acquisition policy thereby compelling them to revisit their decision to continue with their business in the sector.
Assocham has also recommended the government to provide facilities like power supply, connectivity, basic infrastructure like availability of water, land and labour to encourage the developers to set up SEZ projects in the rural belt rather than concentrating at urban/semi-urban areas.
Highlighting the role of state governments, Assocham has said that each state must have specific master plan/town plan/building plan in place for SEZs as it takes about six to nine months to commence construction work after issuing the notification
SEZs must be specially earmarked on barren, wastelands, infertile land and soils with least potential for farming. There should be an effective rehabilitation policy for the actual landowners and displaced landowners like farmers or thevillagers and they must be offered proper stake through share holing in the proposed projects so that he can have a long-term interest in the project and reap long term benefits. Besides, proper training should also be imparted to at least one member of their family to provide a job in the SEZ.
Contiguity norms be strictly applied to the area of core activity of SEZ with certain flexibility to the non-processing area. Besides, there should be a distinction as per the nature of the SEZ like IT SEZ, manufacturing SEZ and others.
Long gestation period and huge investment requirements are certain major factors concerning operationalisation of SEZs. Besides, retrograde provisions like re-notification of SEZs as per various state specific SEZ Act after having notified by the central government is proving to be a stumbling block in smooth operation of many SEZs.
The SEZ units must charge customs duty equivalent to the duty exemption availed on import of raw materials (i.e. on duty foregone basis) with respect to any particular DTA (domestic market sales) transaction.
Assocham has further suggested the government to play a pro-active role while drafting labour laws for SEZs which are deemed foreign territories and existing labour laws are archaic in their case.
Assocham has also stressed upon conducting awareness programmes to educate the industry at large about SEZs, the SEZ Act, rules and regulations to create a positive sentiment about the sector and avoid misinterpretation of the law.
Besides, a single window system must be put in place to ensure hassle free operating environment and the infrastructure and services provided at SEZs must adhere to the well defined global standards and time bound targets.
Top notch administration must be provided to SEZ units by the developers thereby introducing uniform administration practices across the states.
Major SEZ developers are concerned about the deadline for profit-linked deductions. As per the Direct Tax Code (DTC) profit-linked deductions for all SEZs notified on or before Mar. 31, 2012. Besides, SEZ units which will commence commercial operations by Mar. 31, 2014 too will be liable for profit-linked exemptions. Developers and units notified after these dates will only have investment linked exemptions.
Benefits of indirect taxes to SEZ developers and units, as intended under the SEZ Act, must continue under the proposed Goods and Services Tax (GST) regime. Any modification in the same might send a strong signal that government is not keen to promote the SEZ policy thereby hurting the investments from global investors.
Besides, there should be an appropriate policy to encourage power generation and distribution through SEZ units.
The chamber reckons with the government`s observation vis-Ã -vis disinvestment and privatization of SEZs to increase its revenue and release money for social-sector development thereby making SEZs more efficient.
Assocham has further suggested the government to create a policy encouraging multi-product SEZs on public-private partnership (PPP) model and the same may also be considered for SEZs based on thrust areas of infrastructure like power, energy and others.