Tax exemptions and related benefits were imperative to promote special economic zones (SEZs) across the country as they account for 30 per cent of total exports and provide employment opportunities, industry lobby Associated Chambers of Commerce and Industry of India (Assocham) said on Sunday.
"Anomalies in every budget vis-a-vis promised tax breaks and stimulus for SEZs might discourage investors owing to poor implementation of intended legislation thereby hurting the credibility of the SEZ policy," Assocham president R.N. Dhoot said in a statement.
For instance, the proposal to levy 18.5 per cent minimum alternate tax (MAT) and 15 per cent dividend distribution tax on SEZ developers in the budget for this fiscal (2012-13) has raised serious concerns on the SEZ tax policy.
"SEZ developers and investors are in a fix over the stability of policy, especially on taxes and land acquisition policy thereby compelling them to revisit their decision to continue with their business in the key sector," Dhoot observed.
Highlighting the vital role of state governments, he said each state must have specific plan in place for SEZs as it takes about six-nine months to commence construction work after notification.
"SEZs must be earmarked on barren, wastelands, infertile land and soils with least potential for farming. The state governments should provide basic infrastructure such as power, connectivity, water and labour has to be provided to encourage SEZ projects in the rural belt than in urban areas," Dhoot added.
In light of controversies and protracted legal battles on land acquisition, the apex industry body sought an effective rehabilitation policy for landowners like farmers and displaced people with shareholding in the projects to reap long-term benefits and at least one member of the family parting with the land be trained for a secure job in the SEZ.
"Long gestation period and huge investment requirements are detrimental factors in setting up SEZs in a time-bound manner. Besides, retrograde provisions like re-notification of SEZs as per state specific SEZ Act after notification by the central government is a stumbling block in the operation of many SEZs," Dhoot lamented.
Seeking a pro-active role by the state governments in drafting separate labour laws for SEZs, which are deemed foreign territories, Dhoot said the SEZs should be allowed to charge customs duty equivalent to the duty exemption given on import of raw materials.
The apex body also advocated a new policy to encourage multi-product SEZs on public-private partnership model and for thrust areas of infrastructure.