A Look into Special Economic Zones of India
This series SEZ of India deals with the special economic zones in this south Asian country which is already being regarded as a global economic powerhouse – something that has helped it become an important name in international politics as well.
Throughout the series we will look to explore the various facets of the SEZs inIndiaand touch upon different areas of their operation like their export performances and provide complete lists of the operational and the approved SEZs in the country.
Development of SEZ is an important part of the entire process. In these discussions the focus will be on the various procedures applicable for setting up a SEZ as well as the methods for applying for the same.
Introduction of SEZs in India
Indiawas among the earliest countries inAsiato have understood the potential of the Export Processing Zone (EPZ) in order to bolster its exports. The first ever EPZ of Asia was established at Kandla, Gujarat in 1965.
During April 2000, as an integral part of the EXIM (Export-Import) Policy of the Indian government, the Special Economic Zones (SEZs) Policy was declared. This was done in an order to achieve the following goals:
- Overcoming the shortfalls arising due to multiple clearances and controls
- Unbalanced fiscal set-ups
- Lack of international standard infrastructure
- Drawing more FDI
With the SEZ policy the Indian government also wished to provide the local companies with a proper scope for competing on a global scale.
The SEZ Act 2005 was a landmark legislation passed by the Indian government as it was able to provide investors a lot of confidence and also gave an indication that the government was willing to commit for a long term and strong SEZ infrastructure.
The SEZ policy was also supposed to help with increasing the levels of economic activity and creating more jobs. The Indian parliament originally passed the Special Economic Zones Act 2005 during May and the President assented to it on June 23.
The draft versions of the SEZ rules saw a lot of discussion and were put up on the Department of Commerce’s website with the scope for comments and suggestions. There were almost 800 suggestions regarding the draft rules.
The SEZ Act 2005 became effective from February 10, 2006 with support from the SEZ rules and following lots of discussion over the suggestions received at the website.
SEZ of India: Effects and Regulations
The SEZ regulations made the whole process a lot simpler and there were single clearance points on different economic matters related to theUnionand state governments.
The parts ofIndiathat are yet to be converted to special economic zones are referred to as domestic tariff areas. As per tax regulations inIndia, if the SEZ companies sell their products or services in the domestic tariff areas, they will be subjected to customs duties.
SEZ of India: Tax Exemption
The following benefits are provided to the SEZs:
- Exemption from excise or customs duties for purposes of developing SEZs that have been backed by the Board of Approval
- Exemption from dividend distribution taxes as per Section 1150 of the Income Tax Act
- Exemption from income taxes as per the Section 80-IAB of the Income Tax Act
- Exemption from Central Sales Taxes
- Exemption from Minimum Alternate Tax as per Section 115 JB of the Income Tax Act
- Exemption from service taxes
SEZ in States
The SEZs of India are governed by the acts and policies of the union government. The series SEZ of India will focus on such legislations like the SEZ Act, circulars and notifications, amendments and rules, and instructions.
In addition to the Union Government, the following states inIndiatoo have their acts, rules, and policies:
- Uttar Pradesh
- Madhya Pradesh
- West Bengal
- Tamil Nadu
The leading Special Economic Zones in India are:
- SEEPZ Special Economic Zone
- Kandla Special Economic Zone
- Falta Special Economic Zone
- CochinSpecial Economic Zone
- Noida Export Processing Zone
- Madras Special Economic Zone
Importance of SEZ in India
Along with India, the SEZs have been effective catalysts for economic growth throughout the world due to their potential for attracting overseas technology and investments. At present, there are 3000 such economic areas in around 120 countries. These have helped generate approximately 50 million jobs and exports worth in excess of 600 billion US dollars.
Majority of the developed countries around the world have been able to understand the immense potential of the SEZs when it comes to improving the trade scenario, which in turn can help in continued economic growth and greater GDP.
In the last decade or so, the Union Government of India has been committed towards liberalizing its economy and its strong emphasis on SEZs is a part of the same goal. The government has adopted a multi faceted approach, including changes to economic policies and several second generation reforms, in order to achieve its aims.