Direct tax code: SEZ developers worried

The draft direct tax code that will lead to overhaul of the Income Tax Act, has created uncertainty among the developers and units in the special economic zones over continuation of the tax sops.

"... draft direct tax code and the discussion paper has certainly created uncertainity in the minds of Sez developers and investors who intend to set up units in special economic zones," director general of the Export Promotion Council for Export Oriented Units and Sezs L B Singhal said in New Delhi.

Addressing an Assocham seminar on Sezs, Singhal said the finance ministry should immediately clarify how the developers and the units operating in these zones would continue to get tax benefits.

The Sez units are given 100 per cent tax exemption on their income for the first five years, and 50 per cent in the next five years. Another 50 per cent deduction is given on the ploughed-back profits for five years after ten years.

"If the position is not clarified immediately, this would result in delay of the Sez projects," Singhal said.

Discussion paper on the code provides that the provisions of the Income Tax Act, that allows profit-linked incentives and other tax incentives, would remain applicable even after the implementation of the code through its 'grand-fathering'.