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Special Economic Zone

Special Economic Zone

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Published by Esheeta Kainthla

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Published by: Esheeta Kainthla on May 06, 2011
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11/03/2012

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Special Economic Zone
 
(SEZ) is a geographical region that has economic laws thatare more liberal than a country's typical economic laws. The category 'SEZ' coversa broad range of more specific zone types, including Free Trade Zones (FTZ),Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Ports,Urban Enterprise Zones and others. Usually the goal of a structure is to increaseforeign direct investment by foreign investors, typically an international businessor a multinational corporation (MNC).
 SEZs in IndiaIn India, SEZs are the special zones created by the Government and run byGovernment-Private or solely Private ownership, to provide special provisionsto develop industrial growth in that particular area. The government of Indialaunched its first SEZ in 1965, in Kandla, Gujarat. The incentives and facilitiesoffered to the units in SEZs for attracting investments into the SEZs, includingforeign investment include:-
 
D
uty 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 Section10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafterand 50% of the ploughed back export profit for next 5 years.
 
Exemption from minimum alternate tax under section 115JB of the IncomeTax Act.
 
External Commercial Borrowingby SEZ units up to US $ 12500 billion in ayear without any maturity restriction through recognized banking channels.
 
Exemption from Central Sales Tax.
 
Exemption from Service Tax.
 
Single window clearance for Central and State level approvals.
 
Exemption from State sales tax and other levies as extended by therespective State Governments.The major incentives and facilities available to SEZ developers include:-
 
Exemption from customs/excise duties for development of SEZs forauthorized operations approved by the BOA.
 
 
Income Tax exemption on income derived from the business of developmentof the SEZ in a block of 10 years in 15 years under Section 80-IAB of theIncome Tax Act.
 
Exemption from minimum alternate tax under Section 115 JB of the IncomeTax Act.
 
Exemption from dividend distribution tax under Section 115O of the IncomeTax Act.
 
Exemption from Central Sales Tax (CST).
 
Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZAct).List of Special Economic Zones in IndiaCurrently there are 114(as on Oct 2010)SEZs operating throughout India in the following states.[5]Karnataka - 18;Kerala - 6; Chandigarh - 1; Gujarat - 8; Haryana - 3; Maharashtra - 14; Rajastan -1; Orissa - 0 Tamil Nadu - 16; Utter Pradesh - 4; West Bengal - 2.Additionally, more than 500 SEZs are formally approved (as on Oct 2010) by theGovt of India in the following states.[6]Andhra Pradesh - 109; Chandigarh - 2;Chattisgarh - 2;
D
adra Nagar Haveli - 4;
D
elhi- 3; Goa - 7; Gujarath - 45; Haryana -45; Jharkand - 1; Karnataka - 56; Kerala - 28; Madhya Pradesh - 14; Mahrashtra -105; Nagaland - 1; Orissa - 11; Pondicherry - 1; Punjab - 8; Rajasthan - 8; TamilNadu - 70; Uttarankhand - 3; Utter Pradesh - 33; West Bengal - 22;[editEZs in India
 
y
 
- SEEPZ Special Economic Zone 
y
 
- Kandla Special Economic Zone 
y
 
- Cochin Special Economic Zone 
y
 
- Madras Special Economic Zone 
y
 
- Visakhapatnam SEZ 
y
 
- Falta Special Economic Zone
y
 
- Noida Export Processing Zone 
y
 
- Contact SEZs 
Introduction
 
 
India was one of the first in Asia to recognize the effectiveness of the ExportProcessing Zone (EPZ) model in promoting exports, with Asia's first EPZ set up inKandla in 1965. With a view to overcome the shortcomings experienced on accountof the multiplicity of controls and clearances; absence of world-class infrastructure,and an unstable fiscal regime and with a view to attract larger foreign investments inIndia, the Special Economic Zones (SEZs) Policy was announced in April 2000.
 This policy intended to make SEZs an engine for economic growth supported by qualityinfrastructure complemented by an attractive fiscal package, both at the Centre andthe State level, with the minimum possible regulations. SEZs in India functioned from1.11.2000 to 09.02.2006 under the provisions of the Foreign Trade Policy and fiscalincentives were made effective through the provisions of relevant statutes.To instill confidence in investors and signal the Government's commitment to a stableSEZ policy regime and with a view to impart stability to the SEZ regime therebygenerating greater economic activity and employment through the establishment of SEZs, a comprehensive draft SEZ Bill prepared after extensive discussions with thestakeholders. A number of meetings were held in various parts of the country both bythe Minister for Commerce and Industry as well as senior officials for this purpose. TheSpecial Economic Zones Act, 2005, was passed by Parliament in May, 2005 whichreceived Presidential assent on the 23rd of June, 2005. The draft SEZ Rules werewidely discussed and put on the website of the Department of Commerce offeringsuggestions/comments. Around 800 suggestions were received on the draft rules.After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came intoeffect on 10th February, 2006, providing for drastic simplification of procedures andfor single window clearance on matters relating to central as well as stategovernments. The main objectives of the SEZ Act are:(a) generation of additional economic activity(b) promotion of exports of goods and services;(c) promotion of investment from domestic and foreign sources;(d) creation of employment opportunities;(e) development of infrastructure facilities;It is expected that this will trigger a large flow of foreign and domestic investment inSEZs, in infrastructure and productive capacity, leading to generation of additionaleconomic activity and creation of employment opportunities.The SEZ Act 2005 envisages key role for the State Governments in Export Promotion

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