Union Budget 2019:  Information Technology body Nasscom hopes the government will continue giving tax incentives to units in special economic zones beyond March 2020. Nasscom said on Friday that such a move will provide the industry with certainty and enable them to invest in long-term strategy. In its pre-Budget recommendations submitted earlier this week, Nasscom said IT-BPM industry contributes 6.6 per cent to the country's GDP, directly employs over 4.1 million skilled workforce and annually earns over USD 130 billion in foreign exchange. 

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Nasscom Senior Director and Public Policy Head Ashish Aggarwal told PTI, "It would be useful to build on this strength by laying out a Special Economic Zones (SEZ) policy keeping the next 20 years in perspective. This would provide the industry with certainty and enable them to invest in a long-term strategy." 

Nasscom has further suggested that the new tax-friendly SEZ policy should retain existing tax benefits and provide a concessional rate of 9 per cent Minimum Alternative Tax (MAT).

The budget should also provide an exemption from dividend distribution tax (DDT). This would help in achieving the USD 5 trillion GDP milestone by 2024. "A new SEZ policy, on the proposed lines, would help generate further employment and increase earnings in foreign exchange. Such a policy would be a net contributor to the Budget kitty and contribute to inclusive growth through economic growth in tier II cities," Aggarwal said. 

Aggarwal further said that retaining the existing SEZ benefits will not result in any additional financial burden. 
He said the growth of the sector was affected when MAT and DDT benefits were withdrawn from SEZs in 2011. 

"In the subsequent years, exports growth declined significantly to low single-digit rates, including negative growth in a year. Recently, the growth has again shown a promise to pick up...It is important that the hard-earned gains are not lost, again," Aggarwal said.

China offers an incentivised tax rate of 15 per cent to companies in its specified zones, said Aggarwal, adding, Indonesia, Mexico and South Korea offer a reduction of up to 100 per cent in income tax rate to companies in special zones. 

Nasscom has urged the government to incentivise R&D for IT companies and suggested that long term capital gains arising from the sale of shares of unlisted companies should be exempt from tax to encourage investment in startups.