Demands for a complete exemption from Minimum Alternate Tax (MAT) by associations representing Special Economic Zones (SEZs) are gaining momentum, as stakeholders argue that the continued levy of MAT contradicts the government’s original policy framework for SEZ promotion. SEZ developers and units were initially offered a MAT-free environment as part of the incentives under the SEZ Act, 2005, to attract export-driven investments and create globally competitive infrastructure. However, the imposition of MAT at 18.5% from 2011 onwards significantly eroded those benefits, and despite a later reduction to 15%, associations assert that it continues to undermine the viability of SEZ operations.

The issue has been repeatedly raised in pre-budget consultations and formal representations to the Ministry of Finance, where SEZ associations highlight the dual burden of MAT and sunset clauses on tax holidays, which together reduce the financial appeal of operating within SEZs. Many units face high capital investment obligations and long gestation periods, meaning the MAT outflow directly impacts cash flow and reinvestment capacity. Furthermore, the inability to fully utilize MAT credits within the 15-year period due to limited regular tax liability makes the supposed relief mechanism ineffective in practice. Stakeholders argue that a full exemption or at least a sector-specific waiver is essential to revive investor interest in SEZs.

The push for MAT exemption is also framed within the broader narrative of making India a manufacturing and export hub under initiatives like Make in India and Gati Shakti. SEZ stakeholders contend that removing MAT would restore the attractiveness of these zones and align tax policy with strategic economic goals. As the government considers the redesign of SEZ frameworks through the proposed Development of Enterprise and Services Hub (DESH) legislation, industry watchers anticipate that MAT relief could be a key feature in ensuring these hubs are globally competitive and fiscally sustainable.