Rs. 56,418 cr forgone in SEZ-tax-sops in 9 months

The Dollar Business Bureau 

According to a written reply by Nirmala Sitharaman, Minister for Commerce and Trade, the government has “foregone” Rs. 56,418 crore in tax collections for special economic zones. The letter addressed to Lok Sabha, points that the amount was foregone in nine months (April-December) of FY 2016-17. These special economic zones contributed exports of Rs. 3.58 lakh crore during the specified period. 

The letter further mentions that SEZ zones had received duty exemptions worth Rs 52,216 crore between the year 2015-16 and contributed exports worth Rs 4,67,337 crore. 

While the introduction of SEZ’s was suggested to improve manufacturing index in the country, in recent times the concept has only led to a debate on the unviable tax-sops and operational efficiencies. In recent times, SEZ projects had to be either cancelled or stalled owing to lack of interest from developers. 

Although highly lucrative, the concept of SEZs in recent times has found few takers. The minister pointed in her letter, that 109 SEZ projects had to be cancelled owing to developers finding such projects economically unviable. 

While Maharashtra saw 28 projects getting scrapped, 14 in Telangana and 10 projects in Tamil Nadu had to be closed owing to this economic nonviability. This albeit, various news-reports indicating SEZ units in areas such as Tamil Nadu receiving benefits such as concessional VAT rates and duty discounts. 

Units in SEZs besides such state-linked concessions also received 100% tax exemption for the first five years, followed by a 50% tax concession on export incomes for 5 years. The SEZ policy launched in April 2000, provisions a duty-free enclave within the country for the purpose of authorised operations of a SEZ. Among other benefits, SEZ units need not have a license to import, they have freedom on subcontracting, and there are minimal to nil requirement of custom-examination for export/import of cargo. 

The minister in her letter also offered her insights on two other questions. She answered that the government had taken up to the dispute settlement body of the WTO to address the recent US visa fee hike. She also suggested that meat processing and exporting establishments were required to be registered with APEDA (Agricultural and Processed Food Products Export Development Authority) and as such the export-number was yet to grow from 2015-16.