ST, MAT waiver for SEZs on cards

new delhi: in a bid to revive export growth and maintain it in the long term, the government is working out a package of concessions for developers of private sector special economic zones. the incentives under discussion include waiver of sales tax, mat (minimum alternate tax), excise and customs duties on inputs used for development of sezs and provision of income tax holiday for a period of 20 years. discussions are on with state governments on the issue of exempting from sales tax the inputs going into development of basic infrastructure at sezs, highly-placed sources said. while the finance ministry has agreed to provide excise and customs duty waiver, discussions are still on over exemption from mat. some of the decisions are likely to be part of the 2002-02 budget while others will be incorporated in the 2002-2007 export-import policy. the commerce department has argued that incentives to sez developers is as important, if not more, than the sops to provided to units coming up within these zones. the minimum investment needed for the sezs of the type planned in india is estimated at $1 billion which works out to rs 5,000 crore. the government is not in a position to invest so much and it is necessary to encourage the private sector to get into development of sezs. the basic infrastructure necessary for sezs include power, roads and telecom facilities which will cost hundreds of crores. therefore, the commerce ministry’s view is that reducing costs through tariff waiver will make investment in sezs attractive. at least four sezs — positra in gujarat, navi mumbai in maharashtra, vizag in ap and nanguneri in tamil nadu — are in a position to start development. the government is in the process of completing land acquisition for these projects and they are expected to progress quickly in case the sops materialise soon enough. the agreement on sparing inputs from customs and excise levies means that the material and equipment procured for construction of power generation units and roads within sezs will become cheaper. that will bring down project cost and help developers in achieving financial closure at an early date. most developers are planning to tap funds from overseas, sources said. the demand for exemption from mat is in view of the estimate that it will take a long time for sez developers to generate revenue and recover their costs. the need for funds will also be long term and obtaining debt will be easier if tax exemption makes the project attractive, the sources said. the commerce ministry has also demanded that the income tax holiday for sez developers should be 20 years. according to the current norms, the waiver is available for 15 years. also a proposal has been mooted to provide income-tax exemption to sez units in perpetuity, move away from the government’s commitment of offering this concession only till 2010 to units located in export processing zones. in the case of units that are likely to come up in sezs, the commerce department is pushing for liberal rules in line with the concept of treating them to be ‘outside the country’s customs zone’. in view of the strong demand from states, the government has already cleared proposals for setting up of greenfield epzs in up, orissa and mp. in almost all cases state government undertakings are part of the consortium set up by the developers since ‘hand holding’ is essential to handle various issues.