SEZ/STPI/EOU/DGFT-IE CODE

Special Economic Zone

Special Economic Zones (SEZs) are specifically delineated duty-free enclaves treated as a foreign territory for the purpose of industrial, service and trade operations, with exemption from customs duties and a more liberal regime in respect of other levies, foreign investment and other transactions

Greater independence on international trade activities.

Economic characteristics are represented as "4 primacies":
  • constructions primarily relies on attracting and utilizing foreign capitals;
  • primary economic forms are sino-foreign joint ventures and partnerships as well as wholly foreign-owned enterprises;
  • products are primarily export-oriented;
  • economic activities are primarily driven by market.


SEZs are listed separately in the national planning (including financial planning) and have province-level authority on economic administration. SEZ's local congress and government has legislation authority.

Rationale for SEZ scheme.The main objectives of SEZ scheme can be briefly stated as:
  • Attract Foreign Direct Investment (FDI)
  • Earn foreign exchange and contribute to exchange rate stability
  • Boost the export sector, especially non traditional exports
  • Create employment opportunities
  • Introduce new technology
  • Develop backward regions

Features

The salient features of SEZ are
  • No License required for import
  • Manufacturing, trading or services activities allowed
  • Full freedom of subcontracting
  • No routine examination of export import cargo by customs authorities
  • Minimum size of multi product SEZ not to be less than 1000 hectares
  • SEZ units to have positive net foreign exchange earner
  • Financial incentives like tax holidays, duty free imports and exports
  • Single window clearance
  • Financial incentives like tax holidays, duty free imports and exports
  • High quality infrastructure
  • Strategic location and market access
Fiscal benefits for SEZ

- SEZ developers are entitled for income-tax exemption for a block of 10 years in 15 years under section 80-IAB of the Income-Tax Act ,1961
- The provisions of. Section 115JB relating to MAT shall not apply to the income accrued or arising on or after the 1st day of April, 2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone
- No tax on distributed profits shall be chargeable in respect of the total income of an undertaking or enterprise engaged in developing or developing and operating or developing, operating and maintaining a Special Economic Zone for any assessment year on any amount declared, distributed or paid by such Developer or enterprise, by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2005 out of its current income either in the hands of the Developer or enterprise or the person receiving such dividend
- No interest income will be taxable received by non-resident or a person who is not ordinary resident in India on a deposit made in Offshore banking Unit (Section 10(15)(viii) of Income Tax Act,1961.
- Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any Special Economic Zone (Section 54 GA of Income Tax Act,1961)
- Developer of SEZ may import/procure goods without payment of duty for the development, operation and maintenance of SEZ.
- Services provided to the developers of special economic zones and consumed within such Special Economic Zone are exempted from paying service tax subject to the fulfillment of certain conditions.
- CST Exemption to SEZ developers and units on inter sate purchase of goods.
- Exemption from Central Excise duty on procurement of capital goods, raw materials, consumable spares etc. from the domestic market
Income Tax provisions
Note: The Special Economic Zones (Amendment) Rules, 2006 (which came into effect on 10.08.2006) to provide to the effect that for claiming Income-tax benefits, the term trading shall mean import for the purpose of re-export. Thus, profits from trading (exports) of locally procured goods shall not be eligible for Income-tax benefits.
  • Unit
  • Developer and entrepreneur
  • Exemption of capital gains from transfer of capital assets
  • Income of a non-resident
  • Offshore banking unit and unit of International Financial Service centre
  • Industrial park scheme
  • Investors in SEZ
  • Undertaking developing and building housing projects
  • Newly established undertakings in free trade Zones
  • Newly established 100 % export oriented units.
Benefits available to SEZ and SEZ Units can be grouped under the following heads:
  • CUSTOM DUTY
  • CENVAT
  • SERVICE TAX
  • CENTRAL SALES TAX
  • SECURITIES TRANSACTION TAX
  • STAMP DUTY
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