SEZ number may be capped if tax sops continue
The commerce ministry is open to capping the number of IT special economic zones (SEZs), provided the finance ministry is willing to continue the tax sops given to Software Technology Parks of India (STPIs) beyond ’09.
By Amiti Sen, TNN |
NEW DELHI: The commerce ministry is open to capping the number of IT special economic zones (SEZs), provided the finance ministry is willing to continue the tax sops given to Software Technology Parks of India (STPIs) beyond ’09. The commerce ministry, which has come under criticism for the disproportionately high number of IT SEZs approved so far (94 against a total of 150), has now put the ball in the finance ministry’s court. The commerce ministry’s offer is like music to existing IT units operating in STPIs which have been urging the government to remove the sunset clause on tax sops available to STPIs so that they could enjoy tax benefits beyond ’09.
Speaking to ET, commerce ministry officials admitted that the SEZ policy has been criticised by many for resulting in a proliferation of IT SEZs as compared to manufacturing SEZs.
Many contend that lenient norms like land requirement of just 10 hectares for IT SEZs was essentially responsible for the high interest in IT SEZs. “We have no objection to putting a cap on IT SEZs. But, at the same time there should be some alternative for IT units.
That is why we have suggested that if the finance ministry wanted to cap IT SEZs, it should extend tax benefits to STPIs beyond the stipulated date,” an official said. Tax sops given to IT units in STPIs is similar to the sops given to units in SEZs.
STPI units get I-T holiday as per section 10A of the Income Tax Act and 100% customs duty exemption on imports of capital equipment, import of equipment on a loan or lease basis and 100% excise duty exemption on indigenous items procurement.
Nasscom had recently urged the government to give STPIs the same status as SEZs as small IT units operating in STPIs would not find it viable to operate in SEZs due to high rents. A total of 4,000 software companies, including 3,000 small and medium companies, are currently registered under the STPI scheme, contributing nearly 80-90% of the overall software exports.
Speaking to ET, commerce ministry officials admitted that the SEZ policy has been criticised by many for resulting in a proliferation of IT SEZs as compared to manufacturing SEZs.
Many contend that lenient norms like land requirement of just 10 hectares for IT SEZs was essentially responsible for the high interest in IT SEZs. “We have no objection to putting a cap on IT SEZs. But, at the same time there should be some alternative for IT units.
That is why we have suggested that if the finance ministry wanted to cap IT SEZs, it should extend tax benefits to STPIs beyond the stipulated date,” an official said. Tax sops given to IT units in STPIs is similar to the sops given to units in SEZs.
STPI units get I-T holiday as per section 10A of the Income Tax Act and 100% customs duty exemption on imports of capital equipment, import of equipment on a loan or lease basis and 100% excise duty exemption on indigenous items procurement.
Nasscom had recently urged the government to give STPIs the same status as SEZs as small IT units operating in STPIs would not find it viable to operate in SEZs due to high rents. A total of 4,000 software companies, including 3,000 small and medium companies, are currently registered under the STPI scheme, contributing nearly 80-90% of the overall software exports.
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