Withholding tax on core sector ECBs likely to go

The rules on external commercial borrowings (ECBs) could be relaxed further. In order to boost infrastructure investment, the government is considering a proposal to extend withholding tax exemption on ECBs raised for infrastructure projects. The government is also discussing a suggestion to allow developers of special economic zones (SEZs) to raise funds through the ECB route for pure infrastructure development activities, like construction of airports, ports, roads, power generation facilities and water supply amenities. Now only units in the SEZs are permitted to bring in ECBs. The Reserve Bank of India, which has hitherto treated SEZs as commercial real estate activity and hence barred them from raising ECBs, is now considering this relaxation, officials said.