A BACKGROUND
it started with the Export Processing Zones in the mid 1960s
a total of 8 export processing zones established to boost export and manufacturing – Kandla and Surat (Gujarat), SEEPZ –(Maharashtra), Chennai (Tamil Nadu), Falta(West Bengal), Noida(UP), Cochin (Kerala), Vishakhapatnam (AP)
in 2000 the SEZ policy was brought in to attract more investments – foreign and domestic; state policies were made
In 2005 SEZ Act and in February 2006 the SEZ rules were notified by the Ministry of Commerce
Asia’s First Export Processing Zone developed in Kandla in 1965 with a view to promote exports.
Special Economic Zones (SEZs) Policy was announced in April 2000 to overcome the shortcomings experienced on account of the multiplicity of controls and clearances
SEZ’s in India functioned from 1st November2000- 9th February 2006 under the provisions of Foreign Trade Policy and financial Incentives were made effective through the provision of relevant statutes.
THE SEZ ACT 2005, was passed by parliament on May 2005, however after extensive consultations , supported by SEZ rules it came into effect on 10th February 2006.
It provided for drastic simplification of procedures and for single window clearance on matters relating to central as well as State governments..
WHAT IS SPECIAL?
duty-free! freedom from taxes, various subsidies.
hassle-free! freedom from rigid labor and environment regulations
land acquisition up to 1000 ha
Only 25% of the area for industrial activity – the rest of the area for entertainment and residential as well as other commercial activities!
OBJECTIVES
generation of additional economic activity
promotion of exports of goods and services
promotion of investment from domestic and foreign sources
creation of employment opportunities and
development of infrastructure facilities
RULES
• 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 for setting up a unit in a Special Economic Zone;
• Single Window clearance on matters relating to Central as well as State Governments;
• Simplified agreement procedures and documentation with an emphasis on self certification
INCENTIVES & FACILITIES OFFERED TO SEZ
The Incentives & Facilities Offered to SEZ are in two ways:
a) Incentives & Benefits offered to the Units in SEZ
b) Incentives & Benefits offered to SEZ Developers.
1. Incentives & Benefits offered to the Units in SEZ
a. Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units
b. 100% Income Tax Freedom 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.
c. Freedom from minimum alternate tax under section 115JB of the Income Tax Act.
d. External commercial borrowing by SEZ units up to US $ 500 million in a year without any maturity restriction through recognized banking channels.
e. Freedom from Central Sales Tax.
f. Freedom from Service Tax.
g. Single window clearance for Central and State level approvals.
h. Freedom from State sales tax and other levies as extended by the respective State Governments.
2. Incentives & Benefits Offered to SEZ Developers
a. Freedom from customs/excise duties for development of SEZs for authorized operations approved by the BOA.
b. Income Tax Freedom 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.
c. Freedom from minimum alternate tax under Section 115 JB of the Income Tax Act.
d. Freedom from dividend distribution tax under Section 115O of the Income Tax Act.
e. freedom from Central Sales Tax (CST).
f. Freedom from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act)
ADVANTAGES
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
e) Development of infrastructure facilities
f) Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting business
g) Freedom from import duty, VAT and other Taxes
h) A vibrant industrial city with abundant supply of skilled manpower.
i) Pollution free environment with proper drainage and sewage system.
DISADVANTAGES
a) Loss of revenue
b) Land acquisition
c) No strategic planning for electricity and water
d) Creating pollution
e) Exploitation of labors
f) Fertile lands being used for establishing industrial units.
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