Understanding Special Economic Zones

By Author: Alice Coope
Total Articles: 213
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In the EXIM Policy 2000, Special Economic Zone (SEZ) is defined as "a specifically delineated, duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs." Special Economic Zones (SEZ) are certain geographical regions within a nation where the financial and economic laws, which are applicable in other parts of the nation, are relaxed with the aim of encouraging foreign direct investment in the respective country’ economy. Hence, these areas enjoy customs duty and tax exemptions and a liberal atmosphere for foreign investment and transactions. Usually industrial, service and trade operations are carried out in special economic zones. The following are the five main objectives of SEZ.

* Encourage export of goods and services

* Promote investment from domestic and foreign investors

* Generate additional economic opportunities

* Create employment opportunities

* Develop infrastructure facilities

Special economic zones are of different types and it includes Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), ...
... Industrial Parks or Industrial Estates (IE), Free Ports, Urban Enterprise Zones, Technical Zones or Innovational Zones, Industrial Zones or Developmental Zones and Tourist Zones.

Asia’s first Export Processing Zone (EPZ) was in India. It was set up in Kandla in 1965. Since then, many special economic zones have been set up in different parts of India. As of June 2012, there are 143 operating special economic zones in India and there are 634 SEZs formally or principally approved by the government of India. Through SEZs, India has earned INR 3.16 Trillion in exports in 2010-11 fiscal. Moreover, as of 2010-11, SEZ created more than 840,000 jobs.

The entrepreneurs developing units in SEZ benefits from

* Exemption from Customs/excise duties

* Exemption from Income Tax on income derived from the business of development of the SEZ in a block of 10 years in 15 years

* Exemption from Minimum Alternate Tax

* Exemption from Dividend Distribution Tax

* Exemption from Central Sales Tax (CST)

* Exemption from Service Tax

In return, the developer is required to

* Maintain proper (financial year wise) and accurate accounting records

* Implement subcontracting with the permission of the specified officer

* Achieve positive Net Foreign Exchange (NFE) earning cumulatively for a period of 5 years from the start of production

* Import goods and items only after receiving valid LOA

* Submit annual performance reports to the Development Commissioner

* Execute a bond cum legal undertaking with the Development Commissioner and Zone Customs

* Comply with the environmental and pollution control rules

* Abide by the wastage norms admissible under the Foreign Trade Policy

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