Commerce and industry minister Anand Sharma is likely to soon meet revenue secretary RS Gujral and commerce secretary SR Rao to review the progress of the proposed amendments in the Special Economic Zones (SEZ) Act and iron out differences on the issue.
Sources told The Indian Express that the minister will take the review meeting to harmonise opinions of the two departments,which are at loggerheads on several proposed changes in the legislation. While the commerce department has proposed to revise the minimum land area requirement for different categories of SEZs along with reform in the contiguity and vacancy norms,the revenue department is of the opinion that relaxed land requirement norms are likely to lead to an increase in the number of SEZs. This will have a huge revenue implication,fears the finance ministry.
The minister will try to sort out the issues and bring consensus on the proposals, sources said.
As such,according to the commerce ministry,the announcements made in the Budget 2011-12 along with the proposed provisions of Direct Taxes Code have already had adverse impact on SEZs. The finance ministry withdrew both exemption from Minimum Alternate Tax (MAT) in the case of SEZ developers and units along with Dividend Distribution Tax (DDT) exemption for SEZ developers under the Income Tax Act. While MAT at the rate of 18.5 per cent of the book profit is applicable after April 1,2011,DDT has been levied from June 1,2011 at 16.22 per cent,including cess.
To bolster the waning popularity of SEZs,while the commerce department plans to encourage setting up of such zones in undeveloped areas by providing them incentives,the revenue department has stonewalled the suggestion.
However,the finance ministry has objected on the grounds that the move will defeat the objective of SEZs.
The ministry is also looking at addressing the issue of sectoral broad-branding. This would allow similar manufacturing and services sector industries to tap into the synergies arising out of scale of operations,work force strength,and infrastructure requirements.