Exporters operating out of special economic zones (SEZs) are opposing the Central Board of Direct Taxes (CBDT) decision to introduce sunset clause for exemptions to SEZs from March 2017. The move is in line with finance minster Arun Jaitley's proposal to phase out exemptions and reduce corporate tax rate to 25% in four years.
The CBDT recently released a roadmap for phasing out corporate tax exemptions. It will phase out profit and investment-linked and area based tax deductions for companies.
The sunset clause provides that exemptions will go unless they are extended.
The Export Promotion Council for Export Oriented Units & SEZs (EPCES), which has been set up to service export promotional needs of 100% EOUs and units in SEZs in the country, has made a representation to the finance ministry to roll back the notification.
According to exporters, it will dampen the investment sentiments and hit the export numbers.
P C Nambiar, chairman of EPCES, said, "The frequent change in the regulations of SEZ incentives is the major concern for its development and the export industry. We submitted representation saying that sunset clause is not correct because our scheme is not mature enough. From 2006, the government has been cutting the schemes while expecting units to perform. How would this be possible with such constraints and unstable policy."
According to data available with EPCES, in 2013-14, exports worth Rs 494,077 crore was made from the operational SEZs, with the investment of Rs 381,000 crore.
John Joseph, director general of export promotion, said, "We have already taken up the matter. We are trying to help out, we cannot afford to close down the schemes. Five-year period is a very short period to make any changes as far as SEZs are concerned. It will take 8 to 10 years to develop the industry,"
"Our stand is that it is supposed to continue for some more time irrespective of the regime. But CBDT has a different stand. With this, resources are getting shifted, and it is bad for the industry. Whatever changes you are doing, you should have done it long back," said Joseph.
Among the major concerns for exporters is the implementation of Goods and Services Tax (GST). According to exporters, the co-ordination between the states and the central governments is miserable. It may bring more uncertainty in the industry.
GST is scheduled to be rolled out in the next financial year. It will be the biggest tax reform as it consolidates all indirect taxes to create one rate and integrates country into one market.
However, the officials of export promotion assured the benefits of GST which they think reduce the transaction cost of exports. "GST will reduce the manual interface largely involved in the import-export process. It will reduce the paperwork and also the transaction cost," Joseph said.
The CBDT in its notification has also clarified that the provisions having a sunset date will not be touched and there will be no alteration to either advance or postpone the sunset date.
