Special Economic Zones (SEZ)

A special Economic zone is a geographical region that has economic laws which are more liberal than the usual economic laws in the country. The SEZ was first established by the China for increase in investment and increase job opportunities and technical knowledge and bring about certain tax reforms. SEZ was introduced on 1/4/2000 in India with a view to provide an internationally competitive and hassle free environment for exports and make the domestic enterprises and manufacturers globally competitive. The units set up under SEZ can be for manufacturing or rendering service. The policy provides setting up the SEZ in the public sector or private sector or by joint sector or even by the state government.

 The Special Economic Zones Act, 2005, was passed by

Parliament in May.

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.

Comparison between India and China Formation of SEZs No of SEZ Size of SEZ Location

Export Performances
Year Value (Rs. Crore) Growth Rate ( over previous year )

2003-2004 2004-2005 2005-2006

13,854 18,314 22 840

39% 32% 25%

2006-2007
2007-2008 2008-2009 2009-2010

34,615
66,638 99,689 2,20,711.39

52%
93% 50% 121.40%

How to Apply

Any individual, co-operative society, company or partnership firm can file an application for setting up of Special Economic Zone. The application is to be made in Form-A to the concerned State Government and the Board of Approval (BOA) in the Department of Commerce, Government of India. However the application would be considered by the BOA only when the State Government recommendation is received. Minimum area requirements for setting up a SEZ are as follows: Multi Sector SEZ Sector Specific SEZ FTWZ IT/handicrafts SEZ Bio-technology/ non-conventional energy/gems and jewellery Sector

: : : :

1000 hectares 100 hectares 40 hectares 10 hectares . Once the BOA gives formal approval and the concerned Development Commissioner gives an inspection report certifying the vacancy of the area, the area is notified as SEZ.

Formal approvals

In principle approvals

Sector-wise distribution-SEZ.pdf

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).

Lack of Proper Rules-Excessive incentives to SEZ at the cost of other projects. Tax avoidance-loss for government Diversity in development-only certain parts being developed Threat to water security-contamination of water Threat to food industry-Kutch,Gujrat Fertile land being lost Misuse of land for real estate

Reliance Industries mulling to exit Haryana SEZ project. Reliance Industries Ltd (RIL) appears to be pulling out of the its special economic zone (SEZ) project near Gurgaon as the company is in the process of informing the Haryana government that it is ready to hand back 1,400 acres of land allotted to it for setting up the venture.

West Bengal against SEZs, minister tells Infosys. As IT company Infosys seeks a special economic status to its Rajarhat project, its first in West Bengal, state industry minister Partha Chatterjeeon Monday said the Mamata Banerjee government is against special economic zones (SEZs).