SEZ tax holiday setback continues
By Ameya Kunte
It is learnt that CBDT has recently issued a circular which is likely to have a huge negative impact on tax holiday enjoyed by SEZ units in IT sector. The circular states that transfer of people from an existing-unit to a new SEZ unit in the first year of business will not be treated as splitting up or reconstruction of an existing business, provided such transfer does not exceed 20% of total technical manpower headcount actually engaged in software development in SEZ unit. This clarification will not only affect new SEZ unit set-ups, but will also impact tax holiday claims of past years resulting into a litigation.
SEZ which are considered as growth engines of the economy have suffered tax blows in the recent past. SEZs that were promised a complete tax holiday, have been hit with Minimum Alternate Tax (MAT). Contrary to the expectations of relief from Budget 2014, the Finance Minister defended MAT on SEZ citing that "removal of MAT from SEZ developers and units had no justification vis-à-vis other sectors of economy which were liable to pay MAT". FM has also stated that MAT paid is available as credit. However, almost 20% cash outflow on MAT does have significant negative impact on SEZ project's IRR. In 2014 Budget, the Government also clarified that SEZ claiming investment-linked tax benefit (u/s Sec 35AD) will not be eligible for tax holiday u/s 10AA and vice-versa, thus further curtailing tax incentive available to SEZ.
I think Government ought to clarify policy on SEZ scheme on an overall basis & tax is an integral part of it. Else, tax set-backs will surely continue to reduce SEZ attractiveness and drive investors out of SEZ scheme.
In ordinary course we keep issuing and submitting our KYC documents (identity and residential proofs..such as PAN card, electricity bill etc.) to various people. For housing or car or other loans, bank accounts,or even for buying new sim card we submit these documents. At almost all these places they ask for self certification on these documents. We immediately sign those documents and hand over. Just imagine your self certified copies are freely available in the hands of such persons & those documents can be used by him for EVERYTHING! Its really serious and its been seen that in most of the terrorist activities, KYC documents are sourced from the SIM card sellers. Hence, please inculcate a habit of writting the purpose for which you are submitting the self certified KYC Documents so that those documents cannot be used again.
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