New Delhi: Worried over the impact of global slowdown on exports, the commerce ministry has initiated an exercise to revitalise SEZs, which contribute over 3 lakh crore, or about 28%, to the country’s total outbound shipments.

Construction work in progress at an IT SEZ. Photo: Indranil Bhoumik/Mint.

“In order to comprehensively address all issues relating to the policy framework and operational issues related to SEZs, suggestions are invited from all concerned," the ministry said.

It added that in short span of about five years since SEZs Act and Rules were notified, of the 585 SEZs approved, 143 zones are already exporting.

With an investment of 2,00,000 crore, the enclaves provide direct employment to over 7,00,000 persons.

However, uncertainty over tax exemptions to new SEZs has led to decline in interest in the tax-free enclaves. Investors are apprehensive about the new draft Direct Taxes Code (DTC).

According to the revised DTC draft, which will replace the Income Tax Act of 1961, tax exemptions for SEZs will be confined to the existing units.

Over 200 SEZ developers have been given more time to execute their projects.

Also, a number of developers, including that of Navi Mumbai SEZ Pvt Ltd are grappling with the problems of land acquisition. Several of them have also dropped their projects because of the problem.

The industry has also expressed concern over the imposition of Minimum Alternate Tax (MAT) of 18.5% on the book profits of SEZ developers and units.

Under the SEZ Act, units get 100% tax exemption on profits earned for the first five years, a 50% exemption for the next five years and another 50% exemption on re-invested profits in the following five years.

According to official sources, the commerce ministry is also in the process of preparing a discussion paper which includes all issues and the alternatives for resolving the concerns of SEZs.

SEZs in India have emerged as manufacturing and export base.

Commerce secretary Rahul Khullar had said the global economic uncertainty mainly in the US and Europe would impact India’s exports in the coming months.

During April-September period, the country’s exports grew by 52.1% to $160 billion.

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