In addition to Seven Central Government Special Economic Zones (SEZs) and 11 State/Private Sector SEZs which were set-up prior to the enactment of the SEZ Act, 2005, formal approval has also been accorded to 565 proposals out of which 388 SEZs have thus been notified. Presently, there are a total of 185 SEZs which are exporting. The fiscal concessions and the duty benefits that are allowed to the Special Economic Zones (SEZs) are thus inbuilt into the SEZs Act, 2005 and the Rules there under. These exemptions are thus uniformly applicable to all the SEZs and they are in the nature of the incentives for export and are also consistent with the principles that guide the export promotion initiatives of the Government in general.
Special Economic Zones thus come under the Ministry of Commerce & Industry which is regulated by the Department of Commerce, which is an area with special economic regulations that differ from rest of the country. The location of these zones is within the national border and they aim to elevate the growth of trade, investments, foreign investments and create jobs. Running business in SEZ means enjoying of certain tax benefits. SEZs thus aim at increasing economic growth by attracting the foreign investments. China is the best example for setting of SEZ in its country. In India, SEZ policy was launched in April, 2000. SEZ bill was thus drafted keeping in mind the economic growth by imparting confidence among the investors and building of a stabilized government.
The main objective of SEZs in India:
Expanding of the economic activities
Promotion of Exports and Imports
More investment from both the domestic as well as foreign levels
More job opportunities
Incentives through implementation of this policy:
The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs are as under:-
- Exemption from service Tax
- Exemption from the Central GST- Exemption for any inter-state sale which is made by a dealer to a registered dealer for the purpose of manufacturing, packaging, processing, assembling, trading, maintaining and repairing in any Special Economic Zones unit for development.
- Single window clearance from both Centre and State approvals
- Duty free imports which are 100% Income Tax exemption on the export income for SEZ units under Section 10AA of the Income Tax Act for the first 5 years, 50% for next 5 years thereafter and then 50% of the ploughed back export profit for the next 5 years.
- Complete exemption on Income tax earned through exports for SEZs units for first 5 years. Further 50 % for next five years- dividends/interests/long-term Capital gain earned from investments made for the development of Special Economic Zones. Transfer of assets from urban area to special economic zone is exempted from tax on capital gains.
- Exemption from minimum Alternate tax
- Exemption from state sales tax by respective government
- Exemption from excise duty for development of SEZs in India.
- Exemption from labour Laws to encourage entrepreneurs to establish industrial units in Special Economic Zone.
There have been apprehensions on the establishment of SEZs policy. Like loss of revenue by providing of tax exemption, division of India between SEZs and NON- SEZs, acquisition of the agricultural land for the purpose of economic zone and for others. However, an attempt in order to balance these apprehensions has been made by Indian government.