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Special Economic Zone (SEZ)

Special Economic Zone (SEZ) :

(a) Introduction

A Special Economic Zone (SEZ) is a geographically bound zone where the economic laws in matters related to export and import are more broadminded and liberal as compared to other parts of the country. SEZ is considered to be a place outside India for all tax purposes. It is like a separate island within the territory of India and is deemed to be outside the customs territory of India. 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 infrastructure and support services. Within SEZs, a unit may be set-up for the manufacture of goods and other activities including processing, assembling, trading, repairing, reconditioning, making of gold/ silver, platinum jewellery etc.

Goods supplied to SEZs from DTA are treated as exports from India and goods supplied from the SEZ to the DTA are treated as imports into India.

The provisions relating to SEZ are contained in Special Economic Zone Act, 2005 and SEZ Rules, 2006.

State Governments are expected to play a very active role in the establishment of SEZ unit. Any proposal for setting up of SEZ unit in the Private/ Joint/ State Sector is routed through the concerned State government who in turn forwards the same to the Department of Commerce with its recommendations for consideration.

The main objectives of the SEZ Act are:

(a) Export of goods and services without taxes

(b) Generation of additional economic activity

(c) Promotion of exports of goods and services

(d) Promotion of investment from domestic and foreign sources

(e) Creation of employment opportunities

(f) Development of infrastructure facilities

(g) Providing exemption from duties and taxes on procurement

(h) Single window clearance: It is expected that this will trigger a large flow of foreign and domestic investment in SEZs, in infrastructure and productive capacity, leading to generation of additional economic activity and creation of employment opportunities.

The SEZ Rules provide for:

(a) Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting business in SEZs

(b) Single window clearance for setting up of an SEZ

(c) Single window clearance for setting up a unit in a Special Economic Zone

(d) Single Window clearance on matters relating to Central as well as State Governments

(e) Simplified compliance procedures

(f) Maintenance of documents with self-certification

(g) Simplified compliance procedures and documentation with an emphasis on self certification

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

(a) Duty free import/ domestic procurement of goods for development, operation and maintenance of SEZ units.

(b) Exemption from Central Sales Tax.

(c) Exemption from Service Tax.

(d) Single window clearance for Central and State level approvals.

(e) Exemption from State sales tax and other levies as extended by the respective State Governments.

Mohit Sharma
Mohit Sharma

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