It should not surprise you that economists and industries think that special economic zones (SEZs), such as Tata Steel SEZ in Gopalpur, Odisha, are likely to be on a par with the domestic tariff area (DTA) after the direct taxes code (DTC). After all, these SEZs favor tax-free trade and offer many other opportunities akin to investments in DTA. But recently industries and economists have insisted that SEZs should also be given similar flexibility as DTA concerning export promotion schemes such as focus product scheme (FPS), free trade agreements (FTAs), and focus market scheme (FMS.)
According to the Confederation of Indian Industry (CII), an estimated Rs 2.12 lakh crore of investment was fixed in several SEZs of the country, which could not be disregarded in the middle, at any condition. Sanjay Budhia, the chairman of CII’s national committee, said that export is a single-digit margin business, and offering 5-8 percent of incentives in FMS and FPS is likely to make a significant difference. Also, Neeru Ahuja, a partner in Deloitte Haskins and Sells, notified about the government’s possible decision of offering few tax holidays, which will be capital investment-linked but not profit-linked.
In a recently put out consultation paper, the CII mentioned that FTAs provide duty-free access to a range of products in concerned countries, but it is limited to only DTA. However, the paper argues that this takes away from SEZs equal opportunities that they should have on being on a par with the DTA.
The chairman of CII said that SEZs used to enjoy incentives, but now they no longer have it. But with minimum alternate tax into the picture, SEZs, such as Tata Steel SEZ in Gopalpur, Odisha, are as good as other industrial areas when it comes to paying taxes.
The CII also suggested making states attractive for most industries by improving infrastructure, especially railways. However, this doesn’t seem to get SEZs more investments, except for those established near the coastal regions.
So far, only 13 Indian states out of 29 have SEZs operational, mainly concentrated in Andhra Pradesh, Karnataka, Tamil Nadu, Maharashtra, Gujarat, Kerala, Uttar Pradesh, Rajasthan, Haryana, Madhya Pradesh, West Bengal, and Odisha.
The CII also demanded that the state governments should execute SEZ legislation to allow the local development commissioners to turn ‘single window clearance’ into a reality. Presently, the paperwork required for businesses in SEZs to operate outside of SEZs is burdensome and hampers the productivity of the manufacturing units, added the chairman of CII.
The idea behind the development of SEZs, including Tata Steel SEZ in Gopalpur, Odisha, was the lucrative tax relaxation. However, the arrival of direct taxes code may act as a dampener for SEZs as it applies to the SEZs as well.
Despite this, experts believe that SEZs are going to emerge as excellent establishments to set up units since they have other benefits that negate the negative impact of DTC, and will result in a booming industrial sector of the country. So, if you have any business in mind, it’s likely the right time to set the wheels of your project in motion with land leasing in any of the operational SEZs.