The Finance Ministry indicated that the revised Direct Taxes Code draft may stick to denying tax sops to special economic zones (SEZs), even as Commerce Minister Anand Sharma assured that the interests of investors will be protected.
Stating that profit-linked incentives were “distortionary”, the ministry said SEZs had failed to boost the manufacturing sector–as was expected from them.
“The Commerce Ministry should first give its appraisal on what is the current state of SEZs, before demanding continuation of income tax benefits,” a senior finance ministry official said.
According to the official, the ministry feels that SEZs have concentrated only on a few specific sectors, and not helped turn India into a major manufacturing hub.
“SEZs were meant to be export processing units, while they have turned into export zones for only IT and processed diamonds …