Commerce ministry attacks Finance ministry over SEZ tax

The Commerce Secretary Rahul Khullar has scalded the Finance Ministry’s decision to withdraw the Income tax concession given to Special Economic Zones (SEZ.)

Khullar said the move is akin to changing the policy “midstream” and will affect the sentiments towards investing in India.

“It is one issue to hurt people who have already taken the decision [to set up SEZs] but if the MAT ends up altogether discouraging both the foreign and domestic investments, what are we achieving,” he said, when asked about the move.

The Budget had sought to annul the provisions of the SEZ Act which gave special tax concessions to such units. SEZs, which are considered outside Indian territory, were are being set up to generate employment.

Imposing taxes on such units will blunt the growth that the units have achieved so far, Khullar said.

“Why would you [set up an SEZ]? Even as the MAT as it is, tax liability is over 20-21%. So why not stay outside the SEZ, take none of the headache and obligations of the SEZ and the higher prices of the infrastructure of the SEZ and claim the accelerated depreciation benefits and still pay only 20-21% of tax in the domestic tariff area,” Khullar pointed out.

Asked whether the Finance Ministry had consulted with the Commerce ministry before imposing the tax, he said:

“If it took the [Commerce] Minister by surprise, I leave you to draw your own conclusions as to what had transpired before the Budget was announced.”