NEW DELHI: Real-estate firms developing special economic zones (SEZs) will not be eligible for the same tax sops being given to export-oriented units located within them.
The Parliamentary Standing Committee on commerce, a group of legislators looking into the policies governing SEZs, believes that such sops should be linked to the export potential of companies. Real-estate developers are not exporters and the members of the panel argue that tax exemptions should be different for different sectors.
This recommendation, if incorporated in a report the committee will submit in a month, will add to the uncertainty surrounding SEZs, and make it financially less rewarding for companies that had rushed to develop them. Controversies over the acquisition of land and the rehabilitation of farmers from whom the land has been acquired have forced the government to put all but 63 of the 237 approved SEZs on hold.
The current SEZ policy offers tax sops to both companies developing them and those that will be located in them. These sops are also offered across the board, to all SEZs irrespective of their focus, multi-product manufacturing, information technology, gems and jewellery, or non-conventional energy. The policy exempts developers from various taxes, including service and sales tax, and import and excise duties on products required to develop the zones.
The committee of parliamentarians recently met SEZ developers and representatives of various states. It is scheduled to meet farmer organizations on February 11.
The Bharatiya Janata Party (BJP) and the Left parties, at two extremes of the political spectrum, as well as some factions within the ruling United Progressive Alliance coalition are opposed to several facets of the SEZ Act, 2005. The BJP started out as an advocate of the concept, but is now critical of the land acquisition policy. Within the government, while the commerce ministry had been pushing the policy right from the beginning, the finance ministry continues to voice concerns over possible revenue losses from blanket tax exemptions.