Special economic zone (SEZ) is a region inside a province, state or country, set up to promote foreign investment. It has special economic laws that are more liberal than the country's typical economic laws. Government provides exemption in tax (IT, Excise, customs, sales etc.), subsidized water and electricity etc. It acts as foreign territory for tariff and trade operations.
Special Features of SEZ:
- The SEZ units are free from a large number of rules and regulations governing import and export.
- These units are able to import capital goods and raw materials duty free from abroad.
- There is no wastage norm or input-output norm.
- There is no routine examination by customs of export and import cargo.
- There is no need of separate documentation required for customs and EXIM policy.
- There is no requirement of license for imports.
- Compensation of central sales tax paid on domestic purchases.
- In manufacturing sector, 100% foreign direct investment is allowed through automatic route.
- There is no restriction on industrial licensing on products reserved for Small Scale Sector.
Companies Investing in SEZs
- Reliance Mukesh Ambani group is all set to develop a SEZ in Navi Mumbai. The project will be developed on 1,240 hectares.
- The Tata Group is also ready to start working in Special Economic Zone (SEZ) in Gopalpur
- India's largest special economic zone (SEZ) will be set up by Mukesh Ambani's Reliance group in coalition with Haryana government. It will be called Reliance Haryana SEZ Ltd. It will be developed at around 25,000 acres with the investment of Rs 25,000 crore.
- The Tamilnadu state government is going to establish a Special Economic Zone (SEZ) near Hosur. They will invest around Rs. 512 crore.
- Lehman Brothers to invest $300m in R$D SEZ: Lehman Brothers, one of the top US based investment banks and global financial services, is all set to enter in Indian real estate. The group has decided to invest an impressive amount of $80 million in the first round of investment in Bangalore based 404 hectare research and development of SEZ Gandhi City.
SEZs Operating in India Right now there are total nine functional Special Economic Zones operating in India. They are located at:
- SEEPZ Special Economic Zone Mumbai
- Kandla Special Economic Zone Kachchh
- Cochin Special Economic Zone Kakkanad, Cochin
- Madras Special Economic Zone Tambaram,Chennai
- Visakhapatnam Special Economic Zone Visakhapatnam
- Falta Special Economic Zone Kolkata
- Noida Export Processing Zone Noida (U.P)
- Surat Special Economic Zone Surat-394230
- Manikanchan (Gems and Jewellery) Salt Lake City Kolkata
- Indore Special Economic Zone (Multi product) Indore
- Jaipur Special Economic Zone (Gems and Jewellery) Jaipur
- Mahindra City-SEZ, (Auto ancillary, IT and apparel and fashion accessory) Chennai
- Salt Lake Electronic City-SEZ, (Software Development and IT enabled services) Kolkata.
- Moradabad Special Economic Zone (Handicrafts) Kanpur
- Jodhpur Special Economic Zone (Handicrafts) Jaipur
- Mahindra City, (auto ancillaries) Chennai
- Surat Apparel SEZ, ( apparel) Gandhinagar ,Gujarat.
- M/s. Nokia India Pvt. Ltd., (Telecom equipment and services in telecom ) Sriperumbudur (Tamil Nadu)
Incentives & Facilities in SEZ Investment
- Customs and Excise: They are allowed to import all their requirements duty free from the domestic sources. They can procure raw materials, capital goods, spares, packing materials, office equipment and other necessities. The goods imported or procured locally duty free can be used over the approval period of 5 years.
- Income Tax Benefits: Government has provided 100% tax exemption for first 5 years and 50% for next 2 years.
- Central Sales Tax Act: The sales made from domestic tariff area to SEZ units are exempted from tax.
- Service Tax: SEZ units are exempted from service tax.
- Domestic sales by SEZ units will be exempted from SAD.
FDI in SEZ Government has allowed 100% foreign direct investment under the automatic route in manufacturing sector in SEZ. The manufacturing sector covers all units except
- Arms, ammunition and explosive.
- Atomic substance
- Narcotics and hazardous chemicals
- Distillation and brewing of alcoholic drinks
- Cigarettes, cigars and tobacco substitutes.
Advantages of SEZ
- The development of SEZ provides a major boost in enhancing the infrastructure of the area around it.
- The development of a SEZ needs huge man power. The man power needed can be in terms of physical labor, technical experts, managerial experts and many more. But in either of the cases it will bring a large number of employment which is the best thing.
- It makes the exports more viable.
- All this will help the country's products to become more competitive vis-a-vis providing all round development of region.