Special Economic Zones

A Special Economic Zone, in short - SEZ,  is a geographically bound zones where the economic laws in matters related to export and import are more broadminded and liberal as compared to rest  of the country. SEZs are projected as duty free area for the purpose of trade, operations, duty and tariffs. SEZ units are self-contained and integrated having their own infrastructure and support services.

Within SEZs, a 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.

SEZs Act, 2005

Special Economic Zones in India, Ministry of Commerce and Industry, Government of india.

 

Administrative set up

The functioning of the SEZs is governed by a three tier administrative set up. The Board of Approval is the apex body and is headed by the Secretary, Department of Commerce. The Approval Committee at the Zone level deals with approval of units in the SEZs and other related issues. Each Zone is headed by a Development Commissioner, who is ex-officio chairperson of the Approval Committee.

 

The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include:-

  • 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.
  • External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction through recognized banking channels.
  • Exemption from Central Sales Tax.
  • Exemption from Service Tax.
  • Single window clearance for Central and State level approvals.
  • Exemption from State sales tax and other levies as extended by the respective State Governments.  

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 minimum alternate tax under Section 115 JB of the Income Tax Act.
  • Exemption from dividend distribution tax under Section 115O of the Income Tax Act.
  • Exemption from Central Sales Tax (CST).
  • Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).