SEZs make the revenue department jittery

NEW DELHI: The commerce ministry’s enthusiasm for increasing the cap for the number of SEZs has made the revenue department jittery about the revenue loss from the scheme.

As per estimates, Government may have to forego revenue to the tune of Rs 70,000 crore over the next three years. As per a Morgan Stanley estimates, the revenue foregone could be even more at over Rs 93,000 crore in the next few years.

In fact, as per a statistic prepared by the finance ministry with the budget this year showed that it had to forego Rs 16,572 crore of revenue on account of incentives for export promotion schemes including SEZs in ’04-05.

Officials in the revenue department say that investments in SEZs could turn them into tax havens with existing investments relocating there for the tax benefits. But commerce ministry officials have differed saying there would not be any flight of existing investment as adequate safeguards had been built in the rules notified recently.

North Block has asked for a policy to select SEZ developers. Otherwise there is no way to justify how an SEZ promoter has been given a licence over another company.

The finance ministry has pointed out that there has been a massive rush for SEZ projects. It has therefore said a review is necessary as it will not be possible to accomodate all the fresh requests, in view of the implications for revenue loss and the possible misuse of tax benefits.