A Delegation of Export Promotion Council for EOUs and SEZs (EPCES) led by Shri P.C. Nambiar, Chairman, EPCES had met Mrs. Nirmala Sitharaman, Hon’ble Minister of State for Commerce & Industry on January 19, 2016 for resolving the issues of EOUs and SEZs. EPCES delegation comprised of senior representatives of Reliance Industries Jamnagar SEZ, Adani Port & SEZ, Tata Steel SEZ, DLF Ltd., Serum Institute of India Ltd, P.P. Jewellers, Phoenix Infocity, J. Matadee Free Trade Zone, ION Kharadi – Panchshil Group.

 Initiating discussions, Shri P.C. Nambiar, Chairman, EPCES informed that Imposition of MAT/DDT on SEZs has dented the investor friendly image of SEZs, created uncertainty in the minds of foreign & domestic investors and has adversely affected the growth, investments, employment and exports from SEZs in India and resulted in loss of valuable foreign exchange earning of the country. He requested that MAT should be totally withdrawn or at least reduced to its original rate of 7.5%.

 Mrs. Nirmala Sitharaman, Minister of State for Commerce & Industry informed that due to imposition of MAT/DDT there has been slowdown in SEZ sector in terms of growth in SEZs. Ministry of Commerce & Industry is in the process of identifying the reasons for this slowdown in SEZ Sector. The Minister assured the members of the Delegation that Ministry of Commerce & Industry has already taken up this issue with Ministry of Finance.

 As regards Proposal for abolition of all Direct Tax Benefits for SEZs not operationalized before April, 2017, Shri P.C. Nambiar, informed that Central Board of Direct Taxes (CBDT) is considering this proposal.

 In case, this proposal for abolition of all Direct Tax Benefits for SEZs not operationalized before April, 2017 is also implemented, this will further dent the investor friendly image of SEZs and weaken the SEZ Scheme further. It was requested to extend the Sunset Clause on SEZs upto 2023. The Commerce Minister informed that the issue has already been taken up with Finance Minister to remove the Sunset Class on SEZs. Nasscom has also taken up this issue.

 Commerce Minister Ms. Nirmala Sitharaman also assured the delegation to look into the matter raised by them regarding Preferential Rates of FTAs to import from SEZs by DTA importer use of land in Non-Processing Area, and Dual use of land in Non-Processing Area.

Taxation of SEZs threatens investor confidence and growth; industry seeks reversal of recent MAT/DDT measures and extension of sunset relief. Imposition of MAT/DDT on Special Economic Zones has dented investor confidence, slowed SEZ growth and affected exports; industry asked for withdrawal or reduction of MAT, and warned that abolition of direct tax benefits for SEZs not operationalized by April 2017 would further weaken the SEZ scheme. The Ministry of Commerce & Industry is examining the slowdown and has raised the Sunset Clause issue with the Ministry of Finance while also addressing preferential FTA rates and land-use concerns in Non-Processing Areas.