New Delhi: Prime Minister Narendra Modi will hold a high-level meeting on Saturday with senior commerce and finance ministry officials to sort out issues hampering the growth of special economic zones (SEZs) with an eye to boost manufacturing, two government officials said on Friday.
The commerce ministry has sought to do away with minimum alternate tax (MAT) and divident distribution tax (DDT) on
SEZ units and developers to revive the export-oriented industrial enclaves.
Saturday’s meeting is expected to be attended by commerce secretary Rajeev Kher and revenue secretary Rajiv Takru, among others.
Kher on Wednesday said the commerce ministry’s experience of the last few years shows that imposition of MAT and DDT suppressed the potential of SEZs as a tool of exports and industrial development. “So we feel that those impositions should be done away with and this will liberalize the environment around SEZs so that entrepreneurs will make investments, which will lead to manufacturing and employment,” Kher added.
After the government imposed MAT and DDT on SEZs in 2011, investor interest in SEZs significantly came down with many developers seeking to denotify their SEZs. At present, 570 formal approvals have been granted for setting up of SEZs, out of which 388 SEZs have been notified. During the first nine months of 2013-14, total exports to the tune of Rs.77,283.22 crore originated from SEZs, an increase of about 7% over the same period a year ago.
When asked whether he expects the recommendation to be better addressed by the finance ministry given that commerce minister Nirmala Sitharaman is also the minister of state in the finance ministry, Kher said: “I am sure the government has thought about that angle.”
The two ministries have been at loggerheads on taxation issues related to SEZs and gold import curbs, with the finance ministry on several occasions spurning such proposals by the commerce ministry.
Commerce minister Sitharaman has also signalled renewed focus on SEZs by the Modi government. On 2 June, she tweeted: “Was briefed on SEZs. Many challenges. Have to tackle them to boost investors’ sentiment especially in manufacturing.”
Arpita Mukherjee, a professor at the Indian Council for Research on International Economic Relations, said rather than giving direct subsidies to SEZs that are not compliant with World Trade Organization (WTO) rules, India should think of providing “smart subsidies” such as providing sops on power and land acquisitions as well as on services that are compliant with WTO rules.
Source : livemint.com