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Sez Tax Policy To Remain Unchanged
The finance ministry has said that the provisions of the section — which state that only a proportion of profits, based on the proportion of export sales from the SEZ unit to the total turnover of the company, will be exempt — was very clear in its intention and there was no room for any further clarification. Units in special economic zones (SEZs) continue to be haunted by the implication of section 10 AA (7) of the Income-Tax Act which could prevent them from enjoying a complete tax exemption on profits in the first five years.
The commerce & industry department will now, as a last resort, ask the empowered group of ministers on SEZs to make suitable changes in the SEZ Act so that units are not prevented from enjoying 100% tax concession as promised. The commerce department and SEZ units argue that there is an anomaly in the definition as the formula considers the total turnover of the assessee instead of the total turnover of the SEZ unit to compute export profits of the SEZ unit. According to commerce secretary G K Pillai, there is a need to amend the Act to make the necessary changes as SEZ units cannot be made to pay taxes on their profits because of the wording of the Act. “We will ask the EGoM to recommend an amendment to the SEZ Act,” he said.
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