Special Economic Zones (SEZ) are likely to get total exemption from tax on their profits soon

The next meeting of the empowered group of ministers (EGoM), scheduled to take place on

Friday, would take up the issue of totally exempting the export profits of SEZ units from income

tax for a tax holiday period of five years.



Among other controversial matters that are on the agenda is the definition of what constitutes a

‘vacant’ land and in this context whether it should withdraw the approval given to Adani

Group’s multi-product SEZ at Mundra in Gujarat and Essar’s steel SEZ for alleged violation of

the rules regarding vacancy of land. Also on the table are categorizing SEZs as core sector

projects, exempting SEZ units from Minimum Alternate Tax (MAT), doing away with export

duty on supply of steel to SEZs, as well as extending Cenvat credit facility to SEZ developers,

sources said.



At present, the particular provision that deals with this issue of tax on export profits of SEZ units

is Section 10AA of the Income Tax Act. This Section accords income tax exemption to the SEZ

Units on the export income. But, as per the Section, export turnover of the unit is divided by the

total turnover of the assessee while calculation of exemption from export profit.