New Delhi: The parliamentary standing committee on finance has asked the revenue department to study the revenue loss from duty exemptions provided to special economic zones (SEZs), and review these concessions.
The House panel’s move follows the department’s submission that no such study had been carried out recently.
“The committee is surprised that in spite of (the finance) ministry’s earlier concerns and projections on revenue loss, they have not so far done any appraisal or in-depth study on the extent of revenue loss arising out of exemptions allowed to SEZs,” said the panel, which is headed by the main opposition Bharatiya Janata Party leader Murli Manohar Joshi.
The panel also asked the revenue department to obtain zone-wise data on revenues forgone, revenues generated and violations of rules by SEZ units.
In the latest Union Budget, the finance ministry estimates India will forgo Rs3,204 crore as revenue from SEZs in 2010-11, against Rs2,324 crore in the previous fiscal.
Special treatment: Construction work in progress at an SEZ at Rajarhat, near Kolkata. The revenue department recently projected a tax revenue loss of Rs1.06 trillion from SEZs for 2005-2010. Indranil Bhoumik/Mint
During April-December 2009, exports from SEZs grew 127% to Rs1.52 trillion over the corresponding period in the previous year.
SEZs are notified geographical areas in which industrial units benefit from a range of fiscal incentives. The commerce department has notified 350 SEZs across the country, of which 105 are operational, to improve industrialization and boost exports.
The departments of revenue and commerce have often been at loggerheads over the SEZs. While the revenue department says tax incentives are a loss to the exchequer, the commerce department claims the purported revenue loss is only hypothetical. SEZs, it says, have contributed substantially to boost investment, employment and exports.
The revenue department recently projected before the House panel a tax revenue loss of Rs1.06 trillion from SEZs for 2005-2010. This included Rs57,531 crore as direct tax, Rs29,700 crore as customs duty, Rs10,368 crore as excise duty and Rs8,813 crore as service tax revenue.
In a proposed direct tax code, it has also recommended to do away with most tax incentives to SEZ developers and units.