Talks on to extend SEZ sunset clause

Economy


After slashing corporate tax, India is re-looking at the special economic zones framework to make it more attractive for investors.

Commerce and revenue departments have initiated discussions on extending the sunset clause for the scheme that ends March 31, 2020, two government officials familiar with the deliberations told ET. “Discussions are on various aspects of the special economic zones,” said one of the officials quoted above.

The government cut minimum alternate tax to 15% from 18.5% and slashed corporate tax rate to 22% from 30% last Friday as part of the Rs 1.45 lakh crore mega stimulus package to pump prime growth that touched a six year low at 5% in first quarter.

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A final call would be taken after taking a close look at the need for extension, a possible impact, revenue considerations as also government’s intent to phase out tax exemption to move to a cleaner and simpler tax regime, the official said.

One view in government is that a number of SEZs are still left with idle capacity and it makes sense to extend the sunset for some time especially in the wake of investments slowing down.

The government had, in the first Parliament session after elections, amended the SEZ Act allowing trusts to set up units in SEZs

At the end of March 2019, the investment in SEZs stood at over Rs 5 lakh crore and exports stood at over Rs 7 lakh crore, as per the data presented in Lok Sabha. There are 351 notified SEZ till April 2019.

“Extending the sunset clause will help address the slowdown in SEZ space, especially in manufacturing sector,” said Rahul Shukla, executive director, PwC.

Shukla said since IT/ ITeS SEZ have contributed significantly to exports from SEZ, extending benefits will help retain the advantage and enable further consolidation of the gains of past years.

A panel appointed by the government under the chairmanship of Bharat Forge chairman and managing director Baba Kalyani had last year suggested a host of steps to reenergise the sector including delinking SEZs from exports, foreign currency payments, converting them into Employment and Economic Enclaves (3Es) and allow supplies to domestic market in rupees for service SEZs.



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