MAT To Affect 1L cr SEZ Proposals

RAMESH KUMAR VERMA ( CS PURSUING ) (43853 Points)

27 April 2011

MAT To Affect 1L cr SEZ Proposals

The Government of India's (GoI) decision to impose a minimum alternative tax (MAT) of 18.5 per cent on income of units operating within special economic zones (SEZs) is all set to adversely affect Gujarat's 50-odd SEZ proposals at various stages of implementation.

Well-placed industries department sources say that with MAT in place, proposals made in two Vibrant Gujarat investment summits, in 2009 and 2011, worth around Rs 1.25 lakh crore, would be adversely affected.

"The Gujarat government has drawn the attention of the GoI's Export Promotion Council for export oriented units (EOUs) and SEZs that MAT, which has been imposed alongside dividend distribution tax (DDT), will stunt SEZs' growth in particular and exports in general not just in Gujarat but India," said an official.

The matter is particularly serious as, already, Gujarat's dozen-odd SEZs account for nearly 50 per cent of all exports being made from 130 SEZs put into operation all over India. "Out of nearly Rs 3 lakh crore of exports from SEZs in the country in 2010-11, Gujarat's SEZs accounted for Rs 1.5 lakh crore," the official said, though conceding, "Of this, most of the export is from the Reliance Industries Ltd's SEZ in Jamnagar."

Dahej SEZ, being developed by the Gujarat Industrial Development Corporation (GIDC), is being cited as a case in point, suggesting how GoI's adverse policies may affect investment.

Most of the allocable land - 1,175 hectares (ha) out of 1,300 ha - has already been sold out, and an investment worth Rs 7,500 crore has been made in Dahej SEZ. Five units are operational, while another 15 are likely to become operational next year.

"Last year, Rs 436 crore worth of exports took place from Dahej SEZ, and if all 60 proposals pending for investment will come in, exports would reach Rs 76,000 crore. But with MAT and DDT in force, it is difficult to say how many units will come in," the official said, adding, "Already, 24 units have postponed their decision to put in units. We have served them notice that in case they do not begin construction within the stipulated time, land allocated to them would be taken back."

In fact, there is danger that in case SEZ proposals are not implemented, as desired, the land allocated to the developers -around 16,500 hectares (ha) - may become a haven for speculative business for realtors.

"There are 15-odd IT SEZ proposals in Gujarat. Of these, just two have been implemented. As for most others, they are under realtors' plans. They appear not so keen as of today, and are waiting for an opportune moment to kick-start project," the official said, adding, "The case is not very different for other type of SEZs."