It is the end of tax rebates and a software giant is all set to move out. One of the Wipro office clusters in Electronic City 4 (EC 4), which enjoyed its 10-year tenure of rebates doled out by the state industries department, is in the process of shifting its offices from EC to another space in Whitefield.
The S1 and S2 towers of Wipro in its EC 4 campus were under the Special Economic Zone (SEZ), which over the last 10 years enjoyed tax rebates under the industrial policy.
"The offices in these towers are being shifted to another Wipro campus in Whitefield. Without the SEZ rebates, it works out expensive and the operating costs will shoot up. The two towers will be leased/rented out to commercial spaces for revenue generation. This is also an exercise to cut costs, in terms of manpower and numbers," a highly-placed source in Wipro Limited told Bangalore Mirror.
However, a large number of employees who are relocating are unhappy with the Whitefield campus because of the distance and the traffic mess along the corridor.
Special Economic Zones (SEZ) are business areas where trade laws differ from the rest of the country. India's SEZ policy was rolled out in 2000 to boost trade, increase investment and create new jobs by effective administration with liberal trade policies and to cut out red-tapism. If the units move out of the SEZ, they have to pay their Minimum Alternative Tax (MAT) which is calculated at a rate of 18.5 per cent, depending on the book profit of the unit/developer.
In an SEZ, the unit/developer gets a waiver of MAT for 10 years and once the contract expires, it cannot be renewed and the tax has to be paid.
How it works
A senior official in the Information Technology department explains: Most units located in Electronic City Special Economic Zone are nearing completion of their benefit period. The Wipro facility in Doddathogur Village, Begur Hobli Electronic City, became operational in July 2006.
There are two sets of conditions for availing benefits under an SEZ -- one is for a unit and the other is for a developer. After fulfilling certain mandatory conditions, a unit coming under the SEZ can avail a tax holiday for a minimum of 10 years and a maximum of 15 years, whereas a developer is eligible for a 10-year tax holiday from the day the SEZ has been commissioned. A unit notified under SEZ is liable to 100 per cent export profit for the first five years and 50 per cent profit for the next five years. After that the unit can keep 50 per cent of the export profit for another five years provided that the profits are transferred to an SEZ reinvestment reserve account used for setting up machines or plants, within three years.
According to industry sources, Wipro is also planning to cut down its numbers. The two towers from where the offices are being vacated will be let out for commercial purposes to mop-up revenue, since the corporate giant will now have to pay MAT.
Wipro Ltd, in its e-mail response said: "Wipro Ltd constantly evaluates various options to meet our expanding business and infrastructure requirements even as we continue to utilise our existing facilities. We do not have any further comments."
For Units
n Should be exporting goods and services since April 1, 2005
n Be an independent unit and not to be formed by splitting up an existing unit
n Be new and shouldn't be formed by transferring a previously-owned plant or machinery to SEZ unitFor Developers
n Should be involved in development of SEZ besides looking at operations and maintenance of SEZs, including the required infrastructural facilities
Tax Rebates
n For Units: Eligible for a maximum 15-year tax holiday from the date the unit is operational; also eligible for keeping export profits as per guidelines of the SEZ
n For Developers: Eligible up to maximum 10-year tax holiday out of the 15 years from the year the particular SEZ is notified.
Incentives and facilities offered to units in SEZs
Duty free import/domestic procurement of goods for development, operation, and maintenance of SEZ units.
100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first five years, 50% for next five years and 50% of the ploughed back export profit for next five years.
Exemption from Minimum Alternate Tax under section 115JB of the Income Tax Act.
External commercial borrowing by SEZ units up to $500 million in a year without any maturity restriction, through recognised banking channels.
Exemption from Central Sales Tax, Service Tax.
Single window clearance for central and state level approvals.
Incentives and facilities offered to developers
Exemption from customs/excise duties for development of SEZs. Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years, in 15 years under Section 80-IAB of the Income Tax Act.
Exemption from Minimum Alternate Tax under Section 115 JB of the Income Tax Act; exemption from dividend distribution tax. Exemption from Central Sales Tax, Service Tax.
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