Special Economic Zones (SEZ) in India

1 SEZ in India

the Special Economic Zones (SEZs) Policy was announced in April 2000 2 SEZ in India .Concept and Meaning of SEZ India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports. worldand an unstable fiscal regime and with a view to attract larger foreign investments in India. with Asia s first EPZ set up in Kandla in 1965. With a view to overcome the shortcomings experienced on account of the multiplicity of controls and clearances. absence of world-class infrastructure.

and duties. Free Zones (FZ). others. Urban Enterprise Zones and others. laws. Industrial Estates (IE).Definition of SEZ Special Economic Zone means an area that has been specified as an enclave that is duty free and is treated as a foreign territory for various purposes such as tariffs. A Special Economic Zone (SEZ) has economic laws that are more liberal than a country's typical economic laws. trade operations. Export Processing Zones (EPZ). Free Ports. duties. The category 'SEZ' covers a broad range of specific zone SEZ includes Free Trade Zones (FTZ). 3 SEZ in India .

when Murlisone Maran.History of Special Economic Zones From 1965 onwards. Maran. But a revolution came in 2000. 2000. made a tour to the southern provinces of China. India experimented with the concept of such units in the form of Export Processing Zones (EPZ). After returning from the visit. (EPZ). 4 SEZ in India . Five India. SEZ Act (2005) was also introduced and in 2005) 2006 SEZ Rules were formulated. incorporated the SEZs into the Exim Policy of India. formulated. then Commerce Minister. he China. year later.

and maintenance of the Special Economic Zones and for setting up units and conducting business Single window clearance for setting up of a SEZ and an unit in SEZ Single window clearance on matters relating to Central as well as State Governments Easy and simplified compliance procedures and documentations with stress on self certification 5 SEZ in India . operation.objectives of setting up SEZ in India Generation of additional economic activity Promotion of exports of goods and services Promotion of investment from domestic and foreign sources Creation of employment Development of infrastructure facilities Simplified procedures for development.

Exports from the SEZs during the 10-year period could 10touch 352 billion dollars. with IT and ITeS SEZs contributing 30 per cent at 105 billion dollars 6 SEZ in India . 1016 units are in operation in the SEZs. At present.79 lakh persons.000 direct jobs by December 2007. 5and 500. nearly half of India s total annual exports.100.000 crore including FDI of US $ 5-6 billion by the end of December 2007.Benefits from SEZs Investment of the order of Rs. providing direct employment to over 1. about 40 per cent of whom are women.

capital goods.Facilities of SEZ in India Exemption on duties on Indian capital goods and inputs are offered as per the requirements of the approved business activity Taxes are either exempted or waived and even reimbursed in case they are paid in advanced to the concerned authority DutyDuty-free imports of spares. and consumables are offered as per the requirements of the approved business activity Preferential treatment of these units to the Indian market for easy dissemination of their products and / or service Rejected commodities (specifically barred commodities cannot be sold) within an overall limit of 50% may be sold in the domestic tariff area (DTA) on payment of respective duties as applicable after proper notification to the Indian customs authorities. without any application of repatriation tax Total tax exemption on corporate incomes as per the provisions of Section 10 A and 10 B of the Indian Income Tax Act Easy and automatic acceptance system for use of existing trademarks. the NFE and direct tariff area (DTA) sale entitlement shall be judged separately for its hardware and software products Facilitated to retain 100 % in foreign currency in EEFC account of the said trader Tax waiver of dividends and profits for repatriates. And such sales of commodities in the domestic tariff area shall be counted against DTA sale entitlement and sale of such rejected commodities (up to 5% of FOB value of exports) shall not be subject to achievement of NFE All EOU / EHTP / STP / BTP units may sell their finished products or services (excluding pepper and pepper products and marble) Units manufacturing electronics hardware and software. brand names and technological know-how know- 7 SEZ in India . raw materials.

the sale in the DTA in any mode. Further. is received in foreign exchange SEZ units associated with manufacturing gems and jewelry may sell up to 10% of FOB value of exports of the preceding year in direct trade agreement and subject to fulfillment of positive NFE. the unit may sell in DTA its products similar to the goods. the recipient of such trade shall pay concessional rate of duty as applicable.Facilities of SEZ in India Facilitated with out-sourcing of subcontract capacities for export production against orders outsecured by other SME units All SEZ units. The sale of such by-products by units those are bynot entitled to direct tariff area sales Facilitated with out-sourcing of subcontract capacities for export production against orders outsecured by other units 8 SEZ in India . then it may also be sold in bythe direct tariff area. in case of studded jewelry. which are exported or expected to be exported from the units Facilitated with out-sourcing of subcontract of production or part of production process to outIndian or any foreign units Sale to direct tariff agreement is subject to mandatory requirement of registration for pharmaceutical products and inclusive of bulk drugs For Software services units. (excluding gems and jewelry units) may sell goods up to 50% of FOB value of exports subject to fulfillment of positive NFE on payment of concessional duties. duty shall be payable as recommended and amended from time to time Total exemption of duties / taxes on scrap or waste or remnants in case the said crap or waste or remnants are destroyed as per the approval of the customs authorities of India If the end products is a by-product and it is included in the LOP. including on line data communication shall be permitted up to 50% of FOB value of exports and / or 50% of foreign exchange earned through exports of such services. Furthermore. subject to achievement of positive NFE on payment of applicable duties within the provisions of such laws. in case of sale of plain jewelry. where the payment of such services offered to its overseas clients. Within the entitlement of domestic tariff area (DTA) sale.

and Development of infrastructure facilities 9 SEZ in India . Creation of employment opportunities. Promotion of exports of goods and services.The main objectives of the SEZ Act are: are: Generation of additional economic activity. Promotion of investment from domestic and foreign sources.

Single window clearance for setting up of an SEZ. operation and maintenance of the Special Economic Zones and for setting up units and conducting business in SEZs. Simplified compliance procedures and documentation with an emphasis on self certification. Single window clearance for matters relating to Central as well as State Governments. Single window clearance for setting up a unit in a Special Economic Zones. 10 SEZ in India .The salient features/provisions of SEZ Rules Different minimum land requirement for different class of SEZs. Every SEZ is divided into a processing area where alone the SEZ units would come up and the non-processing area where the nonsupporting infrastructure is to be created. Simplified procedures for development.

11 SEZ in India . Acquisition of prime agricultural land. LargeLarge-scale land acquisition by the developers. Misuse of land by the developers for real estate Uneven growth aggravating regional inequalities. may lead to displacement of farmers with meager compensation. Revenue loss due to Tax exemption . having serious implications for food security.SEZ Controversy In spite of the strong objectives of the Indian Government The SES policy is in following controversy Generation of little new activity as there may be relocation of industries to take advantage of tax concessions.

Indian must re-design the SEZ policy to suit its needs and not reborrow the Chinese model.000 projects taking place in SEZs in 120 countries worldwide.A global Overview World Bank estimates. The SEZ concept proved a success in China and Poland. SEZs have been implemented using a variety of institutional structures across the world ranging from fully public (government operator. 12 SEZ in India .SEZs . government regulator) to 'fully' private (private operator. In China over 20 per cent of Foreign Direct Investment (FDI) flows into SEZ and generated 10 per cent of exports. private developer. as of 2007 there are more than 3. government developer. public regulator). Poland's SEZs received 35 per cent of FDI flows.

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