Indian Ministers Agree On Special Economic Zones Bill

by Lorys Charalambous, Tax-News.com, Cyprus

02 May 2005

Following a meeting between Indian Prime Minister Manmohan Singh and key cabinet ministers last week, outstanding issues related to a bill establishing Special Economic Zones (SEZs), which will offer firms long tax holidays, look to have been resolved.

Senior government officials have told the Business Standard that under the terms of the revised bill, developers of SEZs would be required to set up the zones by 2014, getting tax breaks of up to 10 years within a period of 15 years from the date that they established in the zone.

Initially, the SEZ bill prepared by the Ministry of Commerce and Industry had proposed a 20 year tax holiday with 100% income tax exemption for SEZ units for the first five years of operation, 50% exemption for the next five years and 50% exemption on profits reinvested for the next 10 years.

However, the finance ministry wanted to retain a 10-year tax holiday with 100% exemption for five years, 50% for the next two years and 50% exemption on profits reinvested for the next three years.

A further disagreement between the Finance and Commerce ministries on the issue of a common definition of ‘manufacturing’ under excise, income tax and export rules has also been ironed out.

The SEZ Bill is scheduled to be discussed during the next meeting of the Union Cabinet.

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