Tax relief for export-oriented units (EOUs) is likely to be taken up by Commerce and Industry minister Kamal Nath. He would take up this issue with the Finance Ministry to extend the sunset clause to 31 Mar-13 from 31 Mar -10.
The full tax rate on offshore profits would be deferred by three years – from FY10 to FY13. If the proposal is implemented, the tax rates would be ~16% in FY10e; then ~16% in FY11e (down from the earlier estimated 20%). Clearly, the big impact is that there would be no big increase in tax rates in the next three years starting Mar ’10. This would give companies another three full years to increase exposure to SEZs.
While this would benefit the sector, companies that are relatively less prepared (SEZ strategy) and have higher revenue growth would benefit more. Most of the tier-II players not yet prepared for SEZs would benefit the most.