The minimum alternate tax (MAT) levied on special economic zone (SEZ) developers and units in 2011-12, which hit the tax-free status of these enclaves and burdened them at a time of subdued global demand, may finally be removed in the coming Budget.
Top sources indicated an understanding on reinstating the MAT exemption for SEZs has been reached between the finance and commerce ministries, as the latter could convince North Block that the revenue losses could be offset in the medium term by their export push and sale of goods to domestic industries at competitive prices.
The commerce department has been consistent in its demand for removal of MAT and dividend distribution tax (DDT) on SEZ developers — the proposals topped its Budget wish-list in the last five years — but the finance ministry refused on revenue considerations.
The tax waiver would, however, come with the more vigilant scrutiny of the shifting of profits from non-SEZ entities to SEZs by corporate India. SEZs availed of direct tax breaks to the tune of Rs 18,400 crore in 2014-15, although they paid a few thousand crores as MAT in the last fiscal and many hundreds of crores as the dividend distribution tax (an exact break-up of MAT proceeds are not available as SEZs are often one of the agencies of companies than companies themselves).
The government imposed MAT on SEZ developers and units and DDT on developers in 2011-12 when Pranab Mukherjee was the finance minister. FE
> Top sources indicated an understanding on reinstating the MAT exemption for SEZs has been reached between the finance and commerce ministries
> Commerce ministry could convince North Block that the revenue losses could be offset in the medium term by their export push