SPECIAL ECONOMIC

ZONES
 CONTENTS

 What is SEZ?
 Types of SEZ
 SEZs in India
 SEZ rules
 Facilities provided to Developers of SEZ.
 Single window system
 Punjab and SEZ
 India v/s China
 What is SEZ?

 A geographical region that has

economic laws more liberal than a
country's typical economic laws.

 Covers a broad range of more specific

zone types, including Free Trade
Zones (FTZ), Export Processing
Zones (EPZ), Free Ports etc.
Continued..

 A spatial economic island where

more liberal economic laws operate
than outside that specified area.

 Main objective to attract FDI by

excluding a specified geographical
area from the operation of certain tax
laws and import and export laws.
Continued..

 Confined to developing countries.

 No. of developing countries have
resorted to this strategy to attract FDI
like China, India, Iran, Jordan,
Poland, Kazakhstan etc.
 In India, SEZ were started from April
2000.
 In 2005 statutory status given to
SEZs by enacting SEZ Act 2005.
Continued..

 As on today 101 SEZs are in operation

and in principle approval has been
given for setting up another 117 SEZs.

 The SEZ Act of 2005 allows SEZs to

be set up in public sector, private
sector, joint sector, by state
governments and their agencies.
Types of SEZ

 SECTOR SPECIFIC SEZs.

 MULTI-PRODUCT SEZs.

 Port/ Airport Based SEZs

 Free Trade and Warehousing Zones

Continued..

SECTOR SPECIFIC SEZs.

 Defined as a zone meant exclusively
for one or more products or services
in one sector.

 Minimum area requirement is 100

hectares (reduced to 50 hectares for
specified States and Territories).
Continued..

 For Electronic hardware and

software including IT/ITES,
minimum area required is 10
Hectares with a minimum
built up processing area of
one lakh square meters.
Continued..

 For biotechnology, non-

conventional energy including
solar energy
equipments/cells, or gem and
jewellery sectors, the
minimum area requirement is
10 Hectares
Continued..

MULTI-PRODUCT SEZs -
 Signifies an SEZ where units may be
set up for manufacture of services of
two or more goods/services in a sector
or goods/services falling in two or more
sectors.

 Minimum area requirement for SEZ

exclusively for services is 100 hectares.
Continued..

 Minimum area requirement is 1000

hectares (reduced to 200 hectares
for specified States and Territories
like in Assam , Meghalaya,
Nagaland, Mizoram, Manipur, J&K,
Tripura , Sikkim , Himachal Pradesh
and Uttranchal ).
Continued..

PORT/AIRPORT BASED SEZs

 Minimum area requirement is 100 hectares.

FREE TRADE AND WAREHOUSING ZONES

(FTWZ}
 Exemption from customs / excise duties for
development of SEZs for authorized operations
approved by the BOA
 Income Tax exemption on export income for a
block of 10 years in 15 years under Section 80-
IAB of the Income Tax Act
Continued..

 Exemption from minimum alternate tax

under Section 115 JB of the Income Tax
Act

 Exemption from dividend distribution tax

under Section 115O of the Income Tax Act

 Exemption from Central Sales Tax (CST)

Facilities / Incentive to SEZ Developer
List Of Formal
Approval SEZ
List Of Principle
Approved SEZ
Operational SEZ
in India
Sector wise
distribution of
SEZ
State wise
distribution of
SEZ
 SEZ Rules

 Simplified procedures for development,

operation, and maintenance, and also for
setting up units and conducting business
in SEZs;

 Single window clearance for setting up an

SEZ or setting up a unit in SEZ;

 Single Window clearance on matters

relating to Central as well as State
Governments;
Continued..

 Different minimum land requirement for

different class of SEZs.

 Demarcating the processing and non

processing zones wherein the processing
area comprise of the SEZ units and the
non-processing area will host the
supporting infrastructure.
Facilities provided to
Developers of SEZ

 100% FDI allowed for:

• townships with residential, educational

and recreational facilities.

 Income Tax exemption to developers for

any block of 10 years in 15 years.
Continued..

 Duty free import/domestic procurement of

goods for development, operation and
maintenance of SEZs.

 Exemption from Service Tax and the

Central Sales Tax

 Guidelines issued on generation,

transmission and distribution of power in
SEZs
Continued..

 Allocation of power to SEZs from central

quota

 Freedom in allocation of space and built

up area to approved SEZ units on
commercial basis.

 Authorized to provide and maintain

services like water, electricity, security,
restaurants and recreation centeres on
commercial lines.
Continued..

 No license required for import.

 In addition to manufacturing, trading and

services are also allowed.

 Freedom to subcontract.

 Single window approval by Development

Commissioner of the zone.
Continued..

Income Tax Act:

 100% IT exemption (10A) for first 5 years,
50% for 2 years thereafter and 50% of
reinvestment for 3 years

 Permitted to carry forward losses

 Offshore Banking Units allowed to have full IT

exemption for 3 years and 50% for next two
years.
Continued..

Service Tax:
 Exemption from Service Tax to SEZ units

Environment
 Permitted facilities like golf courses, hotels
and non-polluting service industries in the
Coastal Regulation Zone area
Single window system

 The Single Window System is a trade

facilitation idea.

 Its implementation of a single window

system enables international (cross-
border) traders to submit regulatory
documents at a single location and/or
single entity.
Continued..

• The main value proposition for having a

Single Window for a country or economy
is to increase the efficiency through time
and cost savings for traders in their
dealings with various government
authorities for obtaining the relevant
clearance and permit(s) for moving
cargoes across national or economic
borders
Continued..

 In short. It is-
 "A facility that allows parties involved
in trade and transport to lodge
standardized information and
documents with a single entry point to
fulfill all import, export, and transit-
related regulatory requirements. “
Punjab and SEZs

 Punjab enacted the SEZ Act in December

2009, formal approval has been given to
four projects, while two have already been
notified.

 As for the proposed SEZ of DLF, the first

in the state, which was to come up in
Amritsar, uncertainties are yet to clear up.
Continued..

 In March 08, Prime Minister

Manmohan Singh launched real
estate developer DLF Universal’s
SEZ project.

 DLF and the Punjab government had

signed an MoU for the project, which
got in-principle approval.
Continued..

 This was to come up on 1,000 acres

with an investment of Rs 453.69
crore over five years from the date of
handing over the possession of land.
But so far no activity has begun.
India V/S China

 Strong Domestic Market

 Contribution to Exports

 Decentralization of Power

 Flexible Labour Laws

India V/S China
 Strong domestic market: In China, about 50 per
cent of SEZ sales are to the domestic market.

 Though India having large domestic market, has

failed to project this to lure SEZ investors.

 The reason: Policy impediments to sales in the

domestic market. While in China the thrust of
SEZs has been to attract foreign investments and
modern technology, in India the emphasis has
been on exports
Continued..

 Contribution to exports
 In 2001, the share of the five SEZs in
the country's total exports was 10.4
per cent. In contrast, the of Indian
SEZs in 2001-02 was a little over 4
per cent of the total exports.
Continued..

 Decentralisation of power: In
China. Provincial and local
authorities were made partners and
stakeholders, by delegating to them
powers to approve foreign
investment. The SEZ authorities in
China can approve foreign
investment proposals up to $30
million
Continued..

 In India, only State governments are

allowed to set up SEZs and the
powers for foreign investment
approvals are vested with the
Development Commissioners, who
are the representatives of the Central
Government.
Continued..

• Flexible Labour Laws: The hire-and-

fire policy in SEZs has been one of the
biggest attractions for foreign investors in
China.
• All jobs are on labour contract basis,
which stand terminated upon the expiry of
the terms, which can be fixed/flexible or
for a specific job. In contrast, the labour
policy in India is worker, rather than
investment, oriented.
Latest news
 SEZs will have to keep space for SSIs
 Have to reserve one tenth of production
space for SSIs.
 To allocate land to small scale industries.

 As per news in Economic Times

 Dated- 19/01/10
Bibliography

 Sezindia.nic.in
 www.dipp.nic .in
(department of industrial policy and
promotion)
 Wikipedia
 Economic Times
  THANK YOU…..

 God Bless All….!!!!