Special Economic Zones are likely to lose their sheen, with Direct Taxes Code Bill proposing to introduce minimum alternate tax at 20 per cent on the book profit of developers as well as units from April 1, 2012.
“The 20 per cent MAT on SEZ developers and units will make the SEZ Act dead,” officials in the commerce ministry said. MAT is a tax imposed on profit-making companies that do not fall under the tax net because of various exemptions.
The legislation proposes to increase MAT from 18 per cent to 20 per cent of the book profit of a company. “MAT will be applicable to SEZ developers and units,” the officials said. Officials said as such, MAT will also be imposed on developers and units in SEZs.
Units in SEZs get 100 per cent income tax exemption on export income for first five years and 50 per cent for next five years. They are also exempted from MAT. When enacted, the DTC will replace archaic Income Tax Act.