Special Economic

Zone (SEZ)

NITESH KUMAR SINGH

RAVISEKHAR

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 Special Economic Zones

With a view to augmenting

infrastructure facilities for export
production it has been decided to
permit the setting up of Special
Economic Zones in the Public,
Private, Joint Sector or by the
State Governments.

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The need for SEZ and
Government’s policy
 SEZ policy introduced on 1/4/2000 in
India
 To increase exports
 SEZ can be set up by private, public,
joint sector or by the state government
 Convert EPZ to SEZ
 121 new approval for SEZ,

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 OBJECTIVE OF SEZ
 ATTRACT FOREIGN INVESTMENT

 EMPLOYMENT GENERATION

 FOREIGN EXCHANGE EARNINGS

 TECHNOLOGY TRANSFER

 RAISE LEVEL OF ECONOMIC ACTIVITY

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 PROGRESS-PHYSICAL
All 8 EPZs converted into SEZs :-

• Kandla ( Gujarat) : 1965 (625 Acres)

• Seepz( Maharashtra) : 1975 (110 Acres)
• Noida (U P) : 1986 (310 Acres)
• Madras ( T N) : 1986 (262 Acres)
• Cochin ( Kerala ) : 1986 (103 Acres)
• Falta ( W B) : 1986 (280 Acres)
• Visakhapatnam( AP) : 1994 (360 Acres)
• Surat ( Gujarat ) : 1998 (103 Acres)

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 Performance of Units under SEZ
Zone 2003-2004 2004-2005
(Rs. in crores) (Rs. in crores)
Kandla SEZ 1018.82 1060.14
SEEPZ-SEZ 7832.81 8298.59
Noida SEZ 1534.17 4266.00
Madras SEZ 1037.96 1376.91
Cochin SEZ 298.91 462.99
Falta SEZ 825.34 569.15
Visakhapatnam 435.67 579.27
SEZ
Surat SEZ 869.90 1539.72
Manikanchan SEZ --- 95.54
Jaipur SEZ --- 5.27
Indore SEZ --- 55.02

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 ESTABLISHMENT OF SEZ
 The SEZ Act envisages constitution of Board of Approvals
 Is chaired by Additional Secretary, Ministry of Commerce & Industry,
representatives from concerned Deptt. including Revenue, Finance,
Environment & Forests, Law, Urban Development, DGFT, State Govts.
and Development Commissioners.

 The powers and the functions of the Board include granting approval
for:

• establishment of SEZs;
• authorized operations in SEZ to the Developers or
to the units;
• foreign collaboration and FDI;
• providing infrastructural facilities in the SEZ;
• granting license to an industrial undertaking to be
established in SEZ.

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 ESTABLISHMENT OF SEZ
 Central Government is empowered to approve more
than 1 developer in a SEZ in cases where 1
developer does not have in his possession the
minimum area of contiguous land.
 State Government or any person which enters into
agreement with developers to provide infrastructure
facility can be considered as co-developers.

 SEZ developer given full freedom to allocate space

or provide infrastructural services and levy user
charges on agreed terms with units.
 The Developer or Co- Developer shall have at least
26% of the equity in the entity proposing to create
business, residential or recreational facilities in SEZ
 The Central Govt. shall grant Letter of Approval to
the person or the State Govt. concerned for
providing infrastructural facilities in the SEZ
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 ESTABLISHMENT OF SEZ
contd..
The minimum area requirements stipulated for various categories of
SEZ are:
TYPE AREA AREA FOR
SPECIAL
STATES/UTs
Multi- product 1000 hectares 200 hectares
Multi-services 100 hectares 100 hectares
Sector specific - Port or 100 hectares 50 hectares
Airport
IT, Gems and Jewellery, 10 hectares( and min. 10 hectares
bio-tech, non conventional built-up area of 1 lakh
energy sq. mtrs. for IT)

The special States are Assam, Meghalaya, Nagaland, Arunachal Pradesh,

Mizoram, Manipur, Tripura, Himachal Pradesh, Uttaranchal, Sikkim, J&K and
Goa.

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 ESTABLISHMENT OF SEZ
 Contiguous Area- ‘An area which is connecting
without a break, within a common boundary’. In
respect of multi-product SEZ shall be considered by
the BOA on a case to case basis. No relaxation for
sector specific and other categories of SEZs.

 The Developer shall get environmental clearance as

required under the law and the BOA approval does not
include environmental clearance.

 For development of SEZs, public hearing is not

exempted and the process of environmental impact
assessment (EIA).

 IT SEZ’s do not require Environmental clearance.

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SALIENT FISCAL PROVISIONS FOR SEZs

 The permissible economic activity in SEZ is vast and it

covers trading, servicing and manufacturing.
 Any goods or services exported out of or imported into or
procured from the DTA by :
(1) a unit in SEZ ; or
(2) a developer
shall be exempt from payment of taxes, duties or cess
including Excise duty, CST, Service Tax, Security
transaction tax.
 Duty free imports of goods and service for development of
SEZs as well as for SEZ Units.
 Drawback or such other benefits are admissible from time
to time on goods and services provided from DTA to SEZ,
and provided by service provider outside India.
 Sale in the DTA on payment of full applicable duty thereby
providing unrestricted access to domestic market.

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SALIENT FISCAL PROVISIONS FOR SEZs
 Exemption from Income Tax to SEZ units for 15 years (5
[100%] + 5 [50%] + 5 [50%] of profit credited to reserve
fund) .
 Existing SEZ Unit to get income tax exemption for the
balance period. No income tax exemption if 10 years IT
benefit already availed.
 IT exemption extended to export of services which would
include trading as well.
 SEZ developers given IT exemption for 10 consecutive
assessment year out of first 15 years of its operations.
Also allowed to transferee developer.
 OBU entitled for IT exemption for 10 years (5 [100%] + 5
[50%]).
 Unit of an International Financial Service Centre entitled
for IT exemption for a period of 10 years (5 [100%] + 5
[50%]).
 For the purpose of IT exemption manufacture shall have
the same meaning as assigned in the SEZ Act

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SALIENT FISCAL PROVISIONS FOR SEZs

 Exemption of Interest Income of NRI in respect of

deposits in OBUs.
 External commercial borrowings by SEZ units upto
US$500 million in a year.
 100% foreign investment to develop townships within
the SEZs.
 Freedom to make over-seas investment out of Export
Earners Foreign Currency.
 100% Foreign Direct Investment in manufacturing
sector.
 The units in the Zone have to be net foreign exchange
earners but they need not be subjected to any pre-
determined value addition or minimum export
performance requirements.

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Opportunities- Sector
MULTI-
IT/ITES PRODUCTS

AUTOMOBILES
& RELATED
ACTIVITIES
PHARMA &
BIO-
TECHNOLOGY
TEXTILES

OTHERS

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Advantages of SEZ
 Growth and development
 Attracts FDI
 Exposure to technology and
global markets
 Increase in GDP and
economic model
 Employment opportunities are
created
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Disadvantages of SEZ
 Exploitation of laborers
 Loss of revenue for
Government
 Fertile lands being used for
establishing industrial units

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 Conclusion

 A well defined strategy

required for SEZs to be
successful
 SEZs appeal to most
developed countries

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THANK YOU

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