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Special Economic Zone
Special Economic Zone
Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs in India.
Within SEZs, units may be set-up for the manufacture of goods and other activities, including processing, assembling, trading, repairing, reconditioning, making of gold/silver, platinum jewellery, etc.
As per law, SEZ units are deemed to be outside the customs territory of India. 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.
Today, there are approximately 3,000 SEZs operating in 120 countries, which account for over US$ 600 billion in exports and about 50 million jobs. By offering privileged terms, SEZs attract investment and foreign exchange, spur employment and boost the development of improved technologies and infrastructure.
India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, 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 an unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000.
This policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations.
The Special Economic Zone Act, 2005 came into force with effect from 2006. The SEZs Rules, inter-alia, provide for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments.
The main objectives of the SEZ Act are:
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;
The SEZ Rules provide for:
• Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting business in SEZs.
• Single window clearance for setting up of an SEZ.
• Single Window clearance on matters relating to Central as well as State Governments.
• 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 the Income Tax Act.
• Exemption from minimum alternate tax, dividend distribution tax , Central Sales Tax (CST) and Service Tax.
• 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.