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HCL Technologies

Abolish minimum alternate tax on SEZ developers, units

Published Date: 
Feb 21, 2013
Hindu Business Line

The possibility of lowest growth in the last decade accompanied by high levels of inflation and high Current Account Deficit/Gross Domestic Product ratio has put the spotlight on the Finance Minister to deliver a growth-friendly Budget to revive economy.

In spite of the challenges, IT/ITeS industry has showed buoyancy and managed to generate $100 billion in revenues, with exports amounting to $77 billion. Hence, initiatives need to be undertaken through Budget to further strengthen such industries to support the growth.

IT industry has seen commoditisation of basic IT services and the factor of labour arbitrage is getting gradually compromised with other countries entering into the fray. With IT industry being one of the mainstay of exports and employment generation, it has become a necessity to continue the SEZ benefits. This clarity will pave way for further investments in the sector.

IT industry requires land and infrastructure and with major metros getting crowded, there is a need to look at Tier-2 cities. The Government investment on infrastructure and providing subsidy for the training facility for skill enhancement will be a positive step.

Single-window clearances for building plans, Fire NOC, AAI and MoEF for the SEZ will reduce the time and efforts being spent on the clearances. Roles of Government and IT industry can be redefined with IT industry playing the role of a self-regulator as it caters to a global clientele and is already extremely conscious and enlightened about these issues.

Introduction of Minimum Alternate Tax (MAT) has significantly diluted benefits offered under the popular SEZ regime. Abolishing MAT levy on SEZ developers and units, together with the carry forward of MAT credit entitlement for an indefinite period would certainly be a welcome step.

Currently, the foreign dividend received by an Indian company is taxed at the highest rate. For 2011-12, the Budget proposal for a lower rate of 15 per cent tax on foreign dividends was well acknowledged by the industry. This Budget should do away with this tax which will pave the way for inward remittances.

Reasonable, stable and predictable regime on transfer pricing issues will go a long way in improving the competitiveness of the Industry.

Hindu Business Line
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