Lok Sabha Question No. 2609 (UNSTARRED), answered on 2017-03-17
Subject: Revenue Losses
Ministry: FINANCE
Asked by: GOPAL CHINAYYA SHETTY

## Government of India Ministry of Finance Department of Revenue

## LOK SABHA

## UNSTARRED QUESTION NO.  2609

TO BE ANSWERED ON FRIDAY, MARCH 17, 2017 PHALGUNA 26, 1938 (SAKA)

## REVENUE LOSSES

2609: SHRI GOPAL SHETTY:

Will the Minister of FINANCE be pleased to state:

- (a) whether  the  Government  has  made  any  assessment  of  revenue  losses  as  a result of tax concession given to the special economic zones and export sectors;
- (b) if so, the details thereof; and
- (c) the steps taken by the Government to make up the revenue loss?

## ANSWER MINISTER OF STATE IN THE MINISTRY OF FINANCE (SANTOSH KUMAR GANGWAR)

(a)

- & (b):

Yes, Madam.

For Direct Tax, various tax concessions in the form of exemptions/ deductions etc. have been provided under the Income-tax Act, 1961 which have been availed by different sectors of Commerce and Industry including Special Economic Zones (SEZs)  and  export  sectors.  No  sector  wise  details  of  industry  are  however maintained and section wise details of revenue impact of direct tax incentives is presented before Parliament with Budget in the form of document  titled, 'Statement of Revenue Impact of Tax Incentives under the Central Tax System'

Figures of section-wise revenue impact of direct tax concessions given to special economic zones and export sectors for the financial year 2015-16 are as follows:

(Rs. in Crore)

| Nature of Incentive/ Deductions                                                                                     | Companies   |   Firms/AoPs/BoIs |
|---------------------------------------------------------------------------------------------------------------------|-------------|-------------------|
| Deduction of export profits of units located in SEZs (section 10A and 10AA)                                         | 18,864.3    |             387.6 |
| Deduction of profits of undertakings engaged in development of SEZs and Industrial Parks (section 80-IA)            | 403.5       |              75.9 |
| Deduction of profits of undertakings engaged in development of SEZs in pursuance to SEZ Act, 2005 (section 80- IAB) | 1949.8      |              26.3 |

| Total   | 21,217.6   | 489.8   |
|---------|------------|---------|

Revenue foregone on various export promotion schemes during 2015-16 for Indirect Tax was as under:

(Rs. in Crore)

| S.No.   | Name of the Scheme                       | 2015-16   |
|---------|------------------------------------------|-----------|
| 1       | Advance Licence Scheme                   | 25,634    |
| 2       | EOU/EHT/STP                              | 5,613     |
| 3       | EPCG                                     | 9,884     |
| 4       | DEPB Scheme                              | 395       |
| 5       | SEZ                                      | 9,925     |
| 6       | DFRC                                     | 1         |
| 7       | Duty Free Import Authorisation Scheme    | 1,321     |
| 8       | Duty Free Entitlement Credit Certificate | 231       |
| 9       | Target plus schemes                      | 1,001     |
| 10      | Vishesh Krishi and Gram Udyog Yojana     | 1,953     |
| 11      | Served from India Scheme                 | 655       |
| 12      | Focus Market/Product Scheme              | 10,374    |
| 13      | Merchandise Exports from India Scheme    | -         |
|         | TOTAL                                    | 66,987    |

(c): Direct tax concessions are a part of overall fiscal incentives provided by the government  to  realise  macroeconomic  objectives  and  achieve  policy  goals  of development and growth of various sectors of economy. Though the revenue impact has been quantified in terms of tax expenditure as above, it does not imply that this quantum of revenue has been waived by the Government. However, Minimum Alternate  Tax(MAT)  is  levied  at  18.5%  of  book  profits  of  the  companies(Alternate Minimum Tax(AMT)  levied  in  the  case  of  non-corporate  assessees    at  18.5  %  of Adjusted Total Income) including those which are availing tax concessions in SEZs. In this connection, it may also be mentioned that during 2015 Budget Speech, FM announced intention of government to phase out various deductions and exemptions under the Income-tax Act and consequently deductions and exemptions including the deductions availed by export sector and SEZs have been phased out through Finance Act,2016.

For Indirect Tax, these incentives have been extended as part of Government Policy to incentivise exports. Tax are not meant to be exported, therefore, it is not duty loss per se. This is a notional loss.

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