The Prime Minister’s Office (PMO) has asked the commerce and finance departments to expedite the resolution of issues plaguing the special economic zones (SEZs) in order to give impetus to manufacturing.
Apart from resolving the issue of dividend distribution tax (DDT) and minimum alternate tax (MAT), the PMO has asked the two ministries, in a communication dated November 25, that the “matter of dual use of infrastructure for non-processing zones of SEZs should be dealt with on a priority basis as there are several requests pending for the same”. This is something, the PMO has argued, that can be done “immediately”, sources told The Indian Express.
The dual use of infrastructure for non-processing zones is a long-pending issue with the SEZ developers and units. This will allow developers to use the support infrastructure including schools, hospitals, and hotels, for people living outside the SEZs as well subject to payment of the applicable taxes. The SEZ is divided into processing and non processing zones, wherein the production of goods and services takes place in processing zones while the non-processing zones is used for creation of support infrastructure.
However, there have been concerns that though essential, the support infrastructure is often not viable due to low capacity utilisation. It is not allowed to be used by entities outside the SEZs. The developers have been arguing that these conditions are unreasonable and impractical.
Further, the PMO has also asked the finance ministry to “streamline the processes regarding refunds and exemptions and optimise the use of facilities in processing zone. It is also important that the provisions for SEZs should be spelt out clearly in the foreign trade policy”, the source said.
The finance ministry has also been urged to bring to an end the issue of DDT and MAT levy on developers and units. A MAT of 18.5 per cent was imposed on SEZ developers and units and DDT on developers in the Budget 2011-12 by the then finance minister Pranab Mukherjee. This was touted as a major reason for the slowdown in growth of SEZs.
“The intervention of the finance minister has been solicited by the PMO in the issue,” the sources added.
However, last week, commerce and industry minister Nirmala Sitharaman had informed the Lok Sabha that the finance ministry has rejected the demand of restoring the MAT and DDT benefits to the SEZ units and developers. According to the available data, SEZs attracted investment worth Rs 2.36 lakh crore in 2012-13 while providing direct employment opportunities to over 11 lakh people. Exports from SEZs grew by about 31 per cent.