Efforts are on to convince the centre about the issues faced by the new units in Special Economic Zones which are likely to loose Income-Tax exemptions in the Direct Taxes Code regime.

According to the DTC revised draft, units coming up in SEZs after the implementation of the Code from April 1, 2011, would not get I-T holiday.

Many SEZ developers, including infrastructure major GMR, have written to Dr Manmohan Singh, Prime Minister, Pranab Mukherjee, Finance Minister, Anand Sharma, Commerce and Industry Minister, and State Chief Ministers about their concerns on the adverse impact of DTC on their SEZ projects.

Ajay Nijhawan, Convenor, Export Promotion Council for EOUs and SEZs Panel for SEZ Developers, said, “At stake is around Rs30,000-crore worth exposure that banks and financial institutions have to SEZ projects under different stages of development. Many of these SEZs are awaiting new units to come up. If the benefits provided by the SEZ Act are taken away, these loans could turn non-performing assets.”

The SEZ Developers’ Association of India has also written to Mr Mukherjee that if tax benefits are not given to new units, there would be migration of economic activity to other countries, in turn resulting in loss to India.

The Association said if tax benefits are withdrawn, no new unit will come up in SEZs, adding that developers will lose huge investments made in land and infrastructure if companies do not set up units.

The DTC draft states that it would protect profit-linked deductions for developers and existing units in SEZs for the `unexpired’ period. But the Finance Ministry is against tax breaks for new units. It favours investment-linked deductions.

The SEZ Act provides developers 100 per cent I-T exemption for a block of consecutive 10 years of the first 15 years. It also grants units total I-T exemption on export profits for the first five years, and 50 per cent exemption for the next five years.

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