sez final efm

8/3/2019 Sez Final Efm

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EFM Presentation

Special

Economic Zones(SEZs)

Presented by:Gulshan Limbu (NR10046)Brinda Patel (NR10069)



What is SEZ?• A Special Economic Zone is a geographically bound zone where the

economic laws in matters related to export and import are more broadmindedand liberal as compared to rest parts of the country.

• SEZs are projected as duty free area for the purpose of trade, operations,duty and tariffs.

•

SEZ units are self-contained and integrated having their own infrastructureand support services.

• Within SEZs, units may be set-up for the manufacture of goods and otheractivities including processing, assembling, trading, repairing, reconditioning,making of gold/silver, platinum jewellery etc.

•As per law, SEZ units are deemed to be outside the customs territory of India. Therefore, goods and services coming into SEZs from the domestic

tariff area or DTA are treated as exports from India and goods and servicesrendered from the SEZ to the DTA are treated as imports into India.

• In India, SEZs are created by the Government and run by Government-Private or solely Private ownership, to provide special provisions to developindustrial growth in that particular area.



History of SEZ• World’s first known SEZ – Puerto Rico (1947)

• Ireland and Taiwan in 1960s

• In 1980s, China made SEZs global currency with its largest SEZ being the

metropolis of Shenzhen.

• From 1965 onwards, India experimented with the concept of such units in the

form of Export Processing Zones (EPZ)

• Revolution came about in 2000, when Murlisone Maran, then Commerce

Minister made a tour to the southern provinces of China. After returning, heincorporated SEZs in the Exim Policy of India.

• Five years later, SEZ Act (2005) was introduced and in 2006 SEZ Rules were

formulated.



Main Objectives of SEZ Act

(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



Incentives and FacilitiesThe incentives and facilities offered to the units in SEZs for attractinginvestments into the SEZs, including foreign investment include:

•Duty free import/domestic procurement of goods for development, operationand maintenance of SEZ units

• 100% Income Tax exemption on export income for SEZ units under Section10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and50% of the ploughed back export profit for next 5 years.

• Exemption from minimum alternate tax under section 115JB of the Income TaxAct.

• External commercial borrowing by SEZ units up to US $ 500 million in a yearwithout 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 SEZdevelopers include:

• Exemption from customs/excise duties for development of SEZs for authorizedoperations 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 TaxAct.

• 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 SEZAct).



Terms and ConditionsOnly units approved under SEZ scheme would be permitted to be located

in SEZ.

1. The SEZ units shall abide by local laws, rules, regulations or laws in regard

to area planning, sewerage disposal, pollution control and the like. They

shall also comply with industrial and labor laws as may be locally

applicable.

2. Such SEZ shall make security arrangements to fulfill all the requirements of the laws, rules and procedures applicable to such SEZ.

3. The SEZ should have a minimum area of 1000 hectares and at least 35 % of

the area is to be earmarked for developing industrial area for setting up of

processing units.

4. Minimum area of 1000 hectares will not be applicable to product specificand port/airport based SEZs.

5. Wherever the SEZs are landlocked, an Inland Container Depot (ICD) will

be an integral part of SEZs.



List of SEZs in India



Minimum area requirements for setting up aSEZ are as follows:

Multi Sector SEZ : 1000 hectares

Sector Specific SEZ : 100 hectares

FTWZ : 40 hectares

IT/ITES/handicraftsSEZ Bio-technology/non-conventionalenergy/gems and jewellery Sector

: 10 hectares



Advantages of SEZs•15 year corporate tax holiday on export profit – 100% for initial 5 years, 50%for the next 5 years and up to 50% for the balance 5 years equivalent to profitsploughed back for investment.

•Allowed to carry forward losses.

•No license required for import made under SEZ units.

•

Duty free import or domestic procurement of goods for setting up of the SEZunits.

•Goods imported/procured locally are duty free and could be utilized over theapproval period of 5 years.

•Exemption from customs duty on import of capital goods, raw materials,

consumables, spares, etc.

•Exemption from Central Excise duty on the procurement of capital goods, rawmaterials, and consumable spares, etc. from the domestic market.

•Exemption from payment of Central Sales Tax on the sale or purchase of

goods, provided that, the goods are meant for undertaking authorized operations.



•Exemption from payment of Service Tax.

•No routine examination by Customs officials of export and import cargo.

•Setting up Off-shore Banking Units (OBU) allowed in SEZs.

•Exemption from requirement of domicile in India for 12 months prior toappointment as Director.

•Since SEZ units are considered as ‘public utility services’, no strikes would beallowed in such companies without giving the employer 6 weeks prior notice inaddition to the other conditions mentioned in the Industrial Disputes Act, 1947.

•The Government has exempted SEZ Units from the payment of stamp duty andregistration fees on the lease/license of plots.

•External Commercial Borrowings up to $ 500 million a year allowed withoutany maturity restrictions.

•Enhanced limit of Rs. 2.40 crores per annum allowed for managerialremuneration.



Disadvantages of SEZ

• Revenue losses because of the various tax exemptions

and incentives.

•Many traders are interested in SEZ, so that they can

acquire at cheap rates and create a land bank forthemselves.

•The number of units applying for setting up EOU's is not

commensurate to the number of applications for setting upSEZ's leading to a belief that this project may not match up

to expectations.



Export PerformancesExports from the functioning SEZs during the last 7 years are

as under:



SEZ Current Scenario

• The results of the 63 SEZ's approved after SEZ Act (2005)will highlight the usability of these SEZs to India.

• These have had a planned investment of Rs 53,561.02 crore of

which Rs 13,435.10 crore have already been made. Of these Rs2052.4 crore came in form of FDI.

• These will provide the employment of 15,75,452 people on

completion of which 18,457 have already been employed.



Conclusion

SEZs attract FDIs and earn valuable foreign exchange for the

country. So the concept of SEZ definitely offers its share of

benefits for the Indian economy but a more judicious and

equitable distribution of resources will have to be devised to

make it feasible in the long run. Allowing SEZs more time toshow its results will be a more balanced approach.

sez final efm

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