The finance ministry asked its enforcement arms to investigate possible violations by entities operating in special economic zones (SEZs), while the commerce department wants more incentives for these export enclaves.
"The CBEC (Central Board of Excise and Customs) and CBDT (Central Board of Direct Taxes) were asked to furnish a report on the findings and views of the ministry of commerce on the violations notified to them against the units operating in the SEZs," the finance ministry said in an internal note, reviewed by Mint. CBEC and CBDT function under the ministry of finance with investigation arms.
A study group constituted under CBEC cites, in an interim report, large-scale violations by SEZ units, a finance ministry official said. The group will soon submit a final report to finance minister Pranab Mukherjee, he added, declining to be identified.
The commerce ministry is considering fresh tax concessions, lowering the minimum area required for SEZs and extending the benefits of export schemes to SEZ units to make up for the levy of minimum alternate tax and tax concessions that Mukherjee withdrew last year, The Times of India reported on Monday. A commerce ministry official confirmed that the department is in favour of fresh incentives for SEZs.
"SEZ was brought in through a special Act of Parliament and offered tax benefits to developers. Restoring earlier commitments will encourage investors," said Gaurav Karnik, tax partner at audit and consulting firm Ernst and Young. The "intention was good but the multi-sector and multi-service SEZ did not take off much and to that extent SEZ did not deliver much on what the government wanted."
The finance ministry is keen to investigate reports of violations by units in SEZs.
