Comm Dept takes up issue of SEZ MAT with FinMin again

The Commerce Ministry has again asked its finance counterpart to roll back or reduce the minimum alternate tax (MAT) imposed on special economic zones with a view to promoting exports and generating employment in SEZs, a senior official said on Thursday.

Besides, the ministry has taken up issues such as permitting SEZ units to perform job works for units in domestic tariff area (DTA) and allowing exports from SEZs to DTA at the duty rates as given to India's free trade agreement partners, said Additional Secretary in the Department of Commerce Alok Vardhan Chaturvedi.

"The issue of lifting of MAT and DDT...I understand that a total direct tax free regime was offered when the SEZ Act was enacted but suddenly MAT has been introduced by the government....It appears to be unfair for SEZ units and it is not in tune with the government philosophy of stable tax regime. We have taken up the issue with Finance Ministry," he said at a function here.

Elaborating further, he said even though MAT is an advanced tax and can be adjusted, the rate is very high and the period provided for its adjustment is such that the SEZs will end up paying income tax as the entire MAT credit is not adjustable within the limited period of 10 years.

He said the Finance Ministry is arguing that MAT has been imposed to partly recoup the losses of revenue due to various profit-linked exemptions and they are also bringing down the average rate of corporate tax.

However, the commerce department "has taken it up again in view of adverse export conditions and the stellar role played by SEZs in the export growth and the employment generation".

Further, an alternate suggestion regarding reduction of MAT from 20.5% to 7.5% or extension of period to the entire MAT credit to adjust against the tax liability of SEZ has also be taken up with the Finance Ministry, Chaturvedi added.

This issue was time and again taken with the Department of Revenue. In the last pre-Budget consultations also, the commerce department asked the ministry to relook at the matter but there was no relief.

Talking about other matters, the additional secretary said the issue regarding utilisation of available capacity of SEZ by permitting SEZ units to perform job works for units in DTA has also been taken up as at present it is not permissible.

"Only limited activities are permissible. In order to facilitate integration of SEZ with domestic economy, the procedure for job work and domestic clearances from SEZs needs to be streamlined by amending SEZ rules....Finance Ministry counterparts say they (SEZs) have taken the benefit of concessions. So that issue has to be clarified and a consensus has to be reached," he said.

On the issue of permitting exports from SEZs to DTA at the most favourable tariff rates as given to India's FTA partners, he hoped to get some favourable consideration from the Finance Ministry.

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