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Strings attached to tax relief for SEZs

business Updated: May 06, 2007 05:33 IST
Strings attached to tax relief for SEZs

State governments on Saturday said they would not extend tax exemptions to the non-processing areas of special economic zones (SEZs) — a move that could have major cost and revenue implications for both SEZ developers and state governments.

“The empowered committee of state finance ministers on VAT unanimously feel that in non-processing zones of SEZs, no one should impose on states anything relating to states tax exemptions,” committee chairman and West Bengal Finance Minister Asim Dasgupta told reporters here. “In other words, we are against any state tax exemption in any non-processing part of SEZs,” he said.

The group, which met in the Capital, has also formed a committee to prepare a roadmap for implementation of a common Goods and Services Tax (GST) that is proposed to be rolled out from 2010.

The empowered Group of Ministers (eGoM) on SEZs headed by External Affairs Minister Pranab Mukherjee has decided that the minimum processing area for SEZs would be 50 per cent of the total land area. Non-processing area pertains to those areas of the SEZs where the core activity is not undertaken and would have residential complexes, shopping malls, hospitals etc.

“We are now of view that on non-processing zones of SEZs, no one should impose on states that they have to give tax exemptions,” Dasgupta said. “This is the unanimous view of all the states,” he added.

The state finance ministers' panel has also decided to exempt services, such as education and healthcare that are used by the poor.