The government should revisit the policy on special economic zones (SEZs), particularly matters related with taxation in order to make them attractive for domestic and global investors, industry chamber Assocham said today.
Huge investments have been made in SEZs across the country and frequent changes especially relating to tax matters and land acquisition are eroding confidence among investors, the chamber said.
The government had imposed 18.5% minimum alternate tax on SEZ developers and units besides 15% dividend distribution tax on developers.
Uncertainty over tax exemptions to new SEZs has also led to declining interest in the tax-free enclaves. Investors are very apprehensive about the new draft Direct Taxes Code (DTC).
According to the revised DTC draft, which will replace the Income Tax Act of 1961, tax exemptions for SEZs will be confined to the existing units.
"This move will make it unviable for most investors," it said, "Hence the levy of these taxes should be removed."
Under the SEZ Act, SEZ units get 100% tax exemption on profits earned for the first five years, a 50% exemption for the next five years and another 50% exemption on reinvested profits in the following five years.
SEZ developers, on the other hand, get 100% tax exemption on profits for 10 years which they can choose to invoke within the first 15 years of operation.
Merchandise exports from the 143 operational SEZs in the country totalled Rs 72,255 crore in the April-June period, an increase of 23% vis-a-vis the same period last year.