Study Notes: Banking and Finance |

Dear BA’ins,

Today in the study Notes we Discuss about SEZ

Special Economic Zone

This policy intended to make SEZs an engine for economic
growth supported by quality infrastructure complemented by an attractive fiscal
package, both at the Centre and the State level, with the minimum possible
regulations.

India was one of the first in Asia to recognize the
effectiveness of the Export Processing Zone (EPZ) model in promoting exports,
with Asia’s first EPZ set up in Kandla in 1965. With a view to overcome the
shortcomings experienced on account of the multiplicity of controls and clearances;
absence of world-class infrastructure, and an unstable fiscal regime and with a
view to attract larger foreign investments in India, the Special Economic Zones
(SEZs) Policy was announced in April 2000.

Facilities and
Incentives offered to the SEZs

The incentives and facilities offered to the units in SEZs
for attracting investments into the SEZs, including foreign investment
include:-

– Duty free import/domestic procurement of goods for development, operation and
maintenance of SEZ units

– 100% Income Tax exemption 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.

– Exemption from minimum alternate tax

– External commercial borrowing by SEZ units upto US $ 500 million in a year
without 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.

Types

The term special economic zone can also include:

Free trade zones (FTZ)

Export processing zones (EPZ)

Free zones/ Free economic zones (FZ/ FEZ)

Industrial parks/ industrial estates (IE)

Free ports

Bonded logistics parks (BLP

Urban enterprise zones

Objective

The Government of India announced the introduction of
Special Economic Zones in April 2000 to achieve the following 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

Development of infrastructure facilities

Administrative Set Up

The functioning of the SEZs is governed by a three tier
administrative set up. The Board of Approval is the apex body and is headed by
the Secretary, Department of Commerce. The Approval Committee at the Zone level
deals with approval of units in the SEZs and other related issues. Each Zone is
headed by a Development Commissioner, who is ex-officio chairperson of the
Approval Committee

FDI Policy on SEZ

FDI up to 100% is allowed through the automatic route for
all manufacturing activities in Special Economic Zones (SEZs), except for the
following activities:

Arms and ammunition, explosives and allied items of defence
equipment, defence aircraft and warships

Atomic substances

Narcotics and psychotropic substances and hazardous
chemicals

Distillation and brewing of alcoholic drinks

Cigarettes/cigars and manufactured tobacco substitutes

Sectoral norm as notified by Government shall apply to
foreign investment in services

Important SEZs in
INDIA

1. Kandla Special Economic Zone Kandla, Gujarat

2. SEEPZ Special Economic Zone Mumbai, Maharashtra

3. Noida Special Economic Zone Uttar Pradesh

4. MEPZ Special Economic Zone Chennai, Tamil Nadu

5. Cochin Special Economic Zone Cochin, Kerala