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Govt plans to put special economic zones on revival route

While the commerce ministry has been of the view that these zones should enjoy tax breaks, the finance ministry had introduced a minimum alternate tax, which has turned out to be a disincentive.

Mail Today Bureau | August 18, 2014 | Updated 18:13 IST
Govt plans to put special economic zones on revival route
(Photo for representation only. Source: Reuters)

The government is working out a fresh package of tax and non-tax incentives to revive special economic zones (SEZs) and a final view in this regard is likely be taken soon, a finance ministry official said.

While the commerce ministry has been of the view that these zones should enjoy tax breaks, the finance ministry had introduced a minimum alternate tax (MAT) which has turned out to be a disincentive.

"We are discussing with the commerce ministry and working out an overall package of tax and non-tax issues," the finance ministry official said.

The issue assumes importance as the Modi government is keen to create more jobs and spur industrial growth.

The erstwhile UPA government had approved 566 SEZs but only 185 are in operation. Many of the SEZs could not come up due to proposed 18.5 per cent MAT and dividend distribution tax in 2012.

"Reviving SEZs will give a boost to the manufacturing sector, which has registered near-zero growth in the last two financial years," the official added.

The commerce ministry has pointed out that SEZs, which are major export hubs, contribute about one-third to the country's total exports. They provide employment to about 15 lakh people.

Exports from these zones increased from Rs 22,840 crore in 2005-06 to Rs 4.94 lakh crore in 2013-14.

Voicing concern at a large number of stalled SEZ projects across the country, Prime Minister Narendra Modi has said a high-level team has been constituted to review the problems and resolve them at the earliest.

"In the PMO, there is a special team to look into why SEZs are not finding takers and suggest solutions for the benefit of the entire country," the official said.

There have been cases of misuse of incentives with firms at many SEZs, including a cellular telephone manufacturing company, having sold their products within the country, referred to as the domestic tariff area without paying taxes.

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