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Special Economic Zones (SEZs)
Gulshan Limbu (NR10046) Brinda Patel (NR10069)
• SEZ units are self-contained and integrated having their own infrastructure and support services. What is SEZ? . trading. • In India. • As per law.• A Special Economic Zone is a geographically bound zone where the economic laws in matters related to export and import are more broadminded and liberal as compared to rest parts of the country. • SEZs are projected as duty free area for the purpose of trade. SEZs are created by the Government and run by GovernmentPrivate or solely Private ownership. to provide special provisions to develop industrial growth in that particular area. • Within SEZs. operations. making of gold/silver. goods and services coming into SEZs from the domestic tariff area or DTA are treated as exports from India and goods and services rendered from the SEZ to the DTA are treated as imports into India. repairing. duty and tariffs. Therefore. reconditioning. SEZ units are deemed to be outside the customs territory of India. units may be set-up for the manufacture of goods and other activities including processing. assembling. platinum jewellery etc.
India experimented with the concept of such units in the form of Export Processing Zones (EPZ) • Revolution came about in 2000. he incorporated SEZs in the Exim Policy of India. • From 1965 onwards. China made SEZs global currency with its largest SEZ being the metropolis of Shenzhen. when Murlisone Maran. SEZ Act (2005) was introduced and in 2006 SEZ Rules were formulated. After returning. then Commerce Minister made a tour to the southern provinces of China. .History of SEZ • World’s first known SEZ – Puerto Rico (1947) • Ireland and Taiwan in 1960s • In 1980s. • Five years later.
Main Objectives of SEZ Act (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 .
• External commercial borrowing by SEZ units up to US $ 500 million in a year without any maturity restriction through recognized banking channels. • Single window clearance for Central and State level approvals. 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years. • Exemption from Service Tax. 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. including foreign investment include: •Duty free import/domestic procurement of goods for development. • Exemption from State sales tax and other levies as extended by the respective State Governments .Incentives and FacilitiesSEZs for attracting The incentives and facilities offered to the units in investments into the SEZs. • Exemption from Central Sales Tax. • Exemption from minimum alternate tax under section 115JB of the Income Tax Act.
• Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act. . • Exemption from Service Tax (Section 7.The major incentives and facilities available to SEZ developers include: • Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA. • Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act. • Exemption from Central Sales Tax (CST). • Exemption from dividend distribution tax under Section 115O of the Income Tax Act. 26 and Second Schedule of the SEZ Act).
The SEZ should have a minimum area of 1000 hectares and at least 35 % of the area is to be earmarked for developing industrial area for setting up of processing units. 4.Terms and Conditions Only units approved under SEZ scheme would be permitted to be located in SEZ. The SEZ units shall abide by local laws. 3. Minimum area of 1000 hectares will not be applicable to product specific and port/airport based SEZs. 5. rules. pollution control and the like. 1. They shall also comply with industrial and labor laws as may be locally applicable. sewerage disposal. regulations or laws in regard to area planning. 2. Such SEZ shall make security arrangements to fulfill all the requirements of the laws. . Wherever the SEZs are landlocked. an Inland Container Depot (ICD) will be an integral part of SEZs. rules and procedures applicable to such SEZ.
List of SEZs in India .
Minimum area requirements for setting up a SEZ are as follows: Multi Sector SEZ Sector Specific SEZ : : 1000 hectares 100 hectares FTWZ IT/ITES/handicrafts SEZ Bio-technology/ non-conventional energy/gems and jewellery Sector : : 40 hectares 10 hectares .
•Duty free import or domestic procurement of goods for setting up of the SEZ units. spares. from the domestic market. and consumable spares. provided that. consumables. •Exemption from payment of Central Sales Tax on the sale or purchase of goods. the goods are meant for undertaking authorized operations. etc.Advantages of SEZs •15 year corporate tax holiday on export profit – 100% for initial 5 years. •Allowed to carry forward losses. •Exemption from customs duty on import of capital goods. . •Goods imported/procured locally are duty free and could be utilized over the approval period of 5 years. 50% for the next 5 years and up to 50% for the balance 5 years equivalent to profits ploughed back for investment. raw materials. raw materials. •Exemption from Central Excise duty on the procurement of capital goods. •No license required for import made under SEZ units. etc.
•The Government has exempted SEZ Units from the payment of stamp duty and registration fees on the lease/license of plots. •Exemption from requirement of domicile in India for 12 months prior to appointment as Director. •No routine examination by Customs officials of export and import cargo. 1947. 2.40 crores per annum allowed for managerial remuneration. no strikes would be allowed in such companies without giving the employer 6 weeks prior notice in addition to the other conditions mentioned in the Industrial Disputes Act.•Exemption from payment of Service Tax. •External Commercial Borrowings up to $ 500 million a year allowed without any maturity restrictions. •Setting up Off-shore Banking Units (OBU) allowed in SEZs. •Enhanced limit of Rs. . •Since SEZ units are considered as ‘public utility services’.
•The number of units applying for setting up EOU's is not commensurate to the number of applications for setting up SEZ's leading to a belief that this project may not match up to expectations.Disadvantages of SEZ • Revenue losses because of the various tax exemptions and incentives. so that they can acquire at cheap rates and create a land bank for themselves. . •Many traders are interested in SEZ.
Export Performances Exports from the functioning SEZs during the last 7 years are as under: .
. • These have had a planned investment of Rs 53.457 have already been employed. • These will provide the employment of 15.435.4 crore came in form of FDI.02 crore of which Rs 13.452 people on completion of which 18. Of these Rs 2052.561.SEZ Current Scenario • The results of the 63 SEZ's approved after SEZ Act (2005) will highlight the usability of these SEZs to India.10 crore have already been made.75.
So the concept of SEZ definitely offers its share of benefits for the Indian economy but a more judicious and equitable distribution of resources will have to be devised to make it feasible in the long run. Allowing SEZs more time to show its results will be a more balanced approach. .Conclusion SEZs attract FDIs and earn valuable foreign exchange for the country.