A parliamentary standing committee has pulled up the finance ministry for failing to set up a study group to undertake a review of desirability of tax exemptions to the special economic zones (SEZs).
In pursuance of an earlier recommendation of the committee for such a review, the finance ministry had merely stated in an action taken report submitted to the committee that they have initiated steps to constitute such a group. “However, the reply is silent about the steps taken in this regard and the time period by which the study group will be constituted. Since a huge amount of revenue is being lost due to duty exemptions to SEZs, the committee desire that the study group should be constituted at the earliest and the study group should assess the benefits accruing from SEZs particularly with reference to the taxes foregone,” said the committee in its report. The committee said that the study group should also distinguish between the revenue foregone on account exemptions and losses occurring due to pilferage of revenue.
As per the SEZ act, the units operating in these zones get income tax exemption on export profits for the first five years, and 50 per cent exemption for the next five years. The developers also get 100 per cent income tax exemption on profits for 10 years.
The committee had also asked the finance ministry to maintain zone wise data on revenue foregone, revenue generated as well as violations of rules in respect to SEZ units. The committee was not happy with the reply of the finance ministry on this issue that they have taken up the matter with the commerce ministry to get the relevant information. “It is thus obvious that the finance ministry have not taken the matter with due seriousness. The reply is purely routine,” said the report.