The Union Government might not review or consider the extension of the Sunset Clause to the export-oriented units (EoUs), beyond the earlier set deadline of March 31, 2011.

There is no discussion on this (extension of sunset clause) now, it might not be considered, said Dr Rahul Khullar, Union Secretary for Commerce and Industries.

Under the current dispensation, EoUs get 100 per cent benefits under Section 10B of the Income-Tax Act, which means they do not have to pay Income Tax. Should the sunset clause come into force post March 2011, EoUs might have to start paying 33 per cent tax on profits which would translate into a price rise of 10-12 per cent on their products.

Dr Khullar was speaking at an interactive session on Direct Tax Code, organised by the Export Promotion Council for EoUs and SEZ Units, here, on Friday.

The withdrawal of sunset clause and the subsequent imposition of income tax on EoUs will add to our input costs and we will not remain competitive any longer, said Mr Rajiv Maheshwary, Vice-President-Commercial, Vision Rx Lab Private Ltd.

SEZ exports

Exports from SEZs increased to Rs 2,20,711 crore in 2009-10, from Rs 22,840 crore in 2005-06 and investments grew to Rs 1,48,488 crore as on March 31, 2010, against Rs 2,793 crore during same period in 2006, Dr Khullar said, while talking about the growth in the SEZ sector, post the enactment of the SEZ Act in June 2005.

Reacting to queries from SEZ developers on the possible threats posed by the Revised Discussion Paper on Direct Tax Code on the SEZ scheme, Dr Khullar said, I cannot go public on this at a time when we are still on the drawing board. Commenting anything on this matter at present will only be prejudging the issue. Clarity on the matter would soon emerge post the monsoon session, which was due in the next three-to-four weeks, he pointed out.

However, Mr Raman Chopra, Director, Central Board of Direct Taxes, who was also present at the interactive session, assured that all comments pertaining to the revised discussion paper on DTC would be considered and necessary amendments would be made wherever they were found to be reasonable. SEZs have developed a lot and not all of it is due to IT benefits and simply saying the withdrawal of these benefits will turn the whole growth picture around is not right, he observed.