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A Special Economic Zone (SEZ) is a
geographical region that has economic laws
that are more liberal than a country's typical
economic laws. SEZ include a wide range of
zone type as follows:

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SEZ – An Overview
•SEZs, the new engines for export led economic growth in India,
defined as:
“Specifically delineated duty-free enclave and shall be deemed to be
foreign territory for the purposes of trade operations and duties and
. . . . EXIM Policy 2000, Chapter 9 para 30
•Extremely successful Chinese format to promote exports, attract FDI
and foster overall economic growth
•Shenzhen SEZ, started in 1981, has achieved 38% GDP growth CAGR
(highest recorded so far) mainly due to:
Liberal economic framework
Integrated infrastructure at very competitive prices
Objectives of the SEZ
(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;

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Structure of SEZ in India

Manufacturing where the
activities supporting
Provide services infrastructure is to
Indulge in trade be created,
Or warehousing Housing.
Administrative layout of SEZ

Board of approval


SEZ units
Incentives and facilities offered to
the 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 5 years, 50%
for next 5 years thereafter and 50% of the ploughed back export
profit for next 5 years.

Exemption from minimum alternate tax under section 115JB of

the Income Tax Act.
ØExternal commercial borrowing by SEZ units up to
US $ 500 million in a year without any maturity
restriction through recognized banking channels.

ØExemption from Central Sales Tax.

ØExemption from Service Tax.

ØSingle window clearance for Central and State level


ØExemption from State sales tax and other levies as

extended by the respective State Governments.

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Facilities to SEZ Developers
100% FDI allowed for : townships and recreational facilities on a
case to case basis, franchise for basic telephone service in SEZ
Income Tax Benefit under (80 IA) to developers for any block of
10 years in 15 years
Duty free import/domestic procurement of goods for
development, operation and maintenance of SEZs
Exemption from Service Tax
Income of infrastructure capital fund/company from investment
in SEZ exempt from Income Tax
üDeveloper permitted to transfer infrastructure facility
for operation and maintenance.

üGeneration, transmission and distribution of power in

SEZs allowed.

üFull freedom in allocation of space and built up area

to approved SEZ units on commercial basis.

üAuthorized to provide and maintain service like water,

electricity, security, restaurants and recreation centers
on commercial lines.
Facilities to SEZ Enterprises
•Exemption from customs/excise duties.
•Income tax :
100% Income-Tax exemption for first 5 years and 50% for 2
years thereafter.
•Foreign Direct Investment :
100% foreign direct investment is freely allowed in
manufacturing sector in SEZ units under automatic route, except
prohibited items.
No cap on foreign investments for SSI reserved items
•Central Sales Tax Act :
Exemption to sales made from Domestic Tariff Area to SEZ
•Service Tax :
Exemption from Service Tax to SEZ units
● Banking / External Commercial Borrowings :
-External commercial borrowings by units up to $ 500 million a
year allowed without any maturity restrictions.
-Freedom to bring in export proceeds without any time limit.
-Flexibility to keep 100% of export proceeds in EEFC account.
Freedom to make overseas investment from it.
-Exemption from interest rate surcharge on import finance.
-SEZ units allowed to ‘write-off’ unrealized export bills.

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Benefits of SEZ
Exports from the functioning SEZs during the last three
years are as under:

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-Investment and employment in the SEZs set up prior
to the SEZ Act, 2005.

-Investment and employment in the SEZs

notified under the SEZ Act 2005:

Current investment and employment:  

Investment:           Rs. 83450crore
Employment:        1,13,426 persons

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Problem in SEZ

üTransparency in policy formulation.

üPayment problem.
üOpenness in land acquisition.
üPrime agriculture land.

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List of Developers who have set up
qNokia SEZ in Tamil Nadu
qQuark City SEZ in Chandigarh
qFlextronics SEZ in Tamil Nadu
qMahindra World City in Tamil Nadu
qMotorola, DELL and Foxconn
qApache SEZ (Adidas Group) in Andhra Pradesh
qDivvy's Laboratories, Andhra Pradesh
qRajiv Gandhi Technology Park, Chandigarh
qETL Infrastructure IT SEZ, Chennai
qHyderabad Gems Limited, Hyderabad

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