Industry body Assocham on Friday demanded that the government should not take away income tax benefits from SEZs as proposed in the draft direct tax code.
In a representation to Finance Minister Pranab Mukherjee, it said the draft has created uncertainty for both present and potential investors in the special economic zones (SEZs).
"If the provisions for the code get translated into the new Income-Tax Act, it is clear that SEZ units set up after the new law is implemented will not enjoy any exemption. Such provisions will be a major roadblock in the development and growth of SEZs," it said.
According to the revised DTC draft, which will replace the Income Tax Act of 1961 after approval of Parliament, the tax exemptions for the SEZs would be provided only for existing units and not new units.
Units in SEZs get 100 per cent income tax exemption on export income for the first five years, 50 per cent for the next five years. They also get exemption on 50 per cent of the ploughed back export profit for the next five years after the first 10 years.
The industry said the income tax benefits were the only attraction for investments in SEZs, which accounted for about 25 per cent of the country's exports in 2009-10.