Under the existing provisions of section 10AA of the IT Act, a deduction of 100% is allowed in respect of profits and gains derived by a unit located in a SEZ from the export of articles or things or services for the first 5 consecutive AYs; of 50% for further 5 AYs and thereafter, of 50% of the ploughed back export profit for the next 5 AYs. The profits of such units are excluded for the purpose of levy of MAT based on book profits. It is proposed to bring profits of such units within the purview of MAT based on book profits @ 18.50% (plus applicable surcharge and cess).
Further, under section 80-IAB of the IT Act, a deduction of 100% is allowed in respect of profits and gains derived by an undertaking from the business of development of an SEZ notified on or after 1 April 2005 from the total income for any 10 consecutive AYs out of 1 5 AYs beginning from the year in which the SEZ is notified by the Central Government.
Under the existing provisions of section 11 5JB(6), an exemption is allowed from payment of MAT on book profit in respect of the income accrued or arising on or after 1 April 2005 from any business carried on, or services rendered, by an entrepreneur or a developer, in a unit or SEZ, as the case may be.
Further, under the existing provisions of section 115O(6), an exemption is allowed from payment of DDT in respect of the total income of an undertaking or enterprise engaged in developing or developing and operating or developing, operating and maintaining a SEZ for any AY on any amount declared, distributed or paid by such developer or enterprise, by way of dividends (whether interim or otherwise) on or after 1 April 2005 out of its current income. Such distributed income is also exempt from tax under section 10(34) of the IT Act.
Currently, there is no sunset date provided for exemption from MAT in the case of a developer of an SEZ or a unit located in an SEZ. Similarly, there is no sunset date for exemption from DDT in the case of a developer of an SEZ.
It is proposed to sunset the availability of exemption from MAT, in the case of SEZ developers and units in SEZs in the IT Act as well as the SEZ Act.
It is further proposed to discontinue the availability of exemption of DDT in the case of SEZ Developers under the IT Act as well as the SEZ Act for dividends declared, distributed or paid on or after 1 June 2011.
It is also proposed to make consequential amendments by omitting the explanation to section 10(34) of the IT Act.
