Exempt export units from ‘sunset clause’: SEZs to govt

Exporters of goods and services from the designated export-oriented units (EOUs) and special economic zones (SEZs) have urged the government to exempt export-centric and employment generating units from a sunset clause to boost exports of goods and services.

In a letter addressed to the Finance Minister Arun Jaitley, the Export Promotion Council of EOUs and SEZs said frequent change in government policies has led to trust deficit on such export promotion zones and affected fresh investments from domestic and overseas investors.

Introduced in 2005, the SEZ Act has attracted huge investment in its initial years. But, the then Congress government levied Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) in 2012. These levies worked as a speed breaker for capital inflow into these export promotion zones, which were initially planned to be tax free. “Sudden change in the government policy restricted capital inflow into EOUs and SEZs. After achieving to the annual investment inflow of $43.52 billion in 2012-13, the investment inflow slowed down in subsequent years. But, again, during 2016-17, the capital inflow hit to the level of $65.27 billion. The investment inflow would jump leaps and bounds provided the government gives us a long term policy,” said Vinay Sharma, acting chairman, Export Promotion Value of investment and exports from SEZs and EOUs from India Investment Exports ($bn) 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Council of EOU & SEZ.

Exports of goods and services have slumped after achieving the level of $87.55 billion for 2012-13 to the level of $70.79 billion for 2015-16 before recovering again to the level of $80.76 billion for 201617.

Meanwhile, exporters said the sunset clause proposed by the finance minister would withdraw all incentives offered to the export oriented units in SEZs and EOUs by 2020. This means, the export oriented units would have to pay the same tax a manufacturer or a service provided pays in the domestic tariff area (DTA).

“EOUs and SEZs have made available all the facilities required for setting up of a business unit, including infrastructure, customs house and banks within the notified area. Also, the SEZ Act has also mentioned an exit clause for units. Even foreign investors can approach us to have all facilities in place without any hurdles. But, we require a stable policy from the government to continue investors’ trust,” said Sharma.