New Delhi, Sept 16 (UNI) Even as the Commerce Ministry's tangle with the Finance Ministry on the issue of tax exemptions to special economic zones (SEZs) remains unresolved, the inter-ministerial board of approval (BoA) has convened a meeting on September 22 to take up 35 SEZs proposals for consideration.
Of the total proposals, six, which had been granted in-principle nod earlier, will be taken up by the board for formal approval, an official announcement said today.
The maximum nine proposals have come from industrial state of Maharashtra, while six are from Tamil Nadu which is fast catching up in industrial activity. Five project proposals each have come from Uttar Pradesh and Gujarat, while two each for tax-free enclaves are from Andhra Pradesh, Punjab and Haryana.
One SEZ project has been mooted in Rajasthan, Orissa and West Bengal.
As many 12 developers propose to set up SEZs for information technology and IT-enabled services.
SEZs meantime continue to be haunted by the implication of section 10 AA (7) of the Income-Tax Act which could prevent them from enjoying a complete tax exemption on profits in the first five years as promised in the SEZ Act.
The finance ministry says if a unit exports 50 per cent of the company's total turnover, then the exemption on the profit that it makes from exports will be restricted to only 50 per cent instead of 100 per cent promised in the SEZ Act.
Commerce and Industry Minister Kamal Nath has taken the issue with the Prime Minister, seeking correction in the way tax on export profits is computed.
Commerce department officials point out that the exemption on export profits of SEZ units is the most important feature of the SEZ Act and cannot be diluted.
As per the Act, SEZ units that start producing articles or providing services on or after April 1, 2005, will be eligible for a deduction of 100 per cent of export profits for the first five years from the year in which such manufacture or provision of services begins.
A deduction will be allowed for 50 per cent of export profits for the next five years, while for the following five years, units will get up to 50 per cent deduction on reinvested profits.
UNI SAA SR VC1707