Special Economic Zone (SEZ)
Special Economic Zone (SEZ) is a specifically delineated duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. In order words, SEZ is a geographical region that has economic laws different from a country’s typical economic laws. Usually the goal is to increase foreign investments. As per the “Special Economic Zones Rules, 2006”, notified by the Department of Commerce, in case a SEZ is proposed to be set up exclusively for electronics hardware and software, including information technology enabled services, the area shall be ten hectares or more with a minimum built up processing area of one lakh square meters. A SEZ can be set up by the following:
- Central Government,
- State Government,
- Private Limited Company,
- Public Limited Company,
- Foreign Company (Jointly by any of the above)
The incentives and facilities offered to the units in SEZs for attracting investments in to 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
- Exemption from minimum alternate tax under section 115JB of the Income Tax Act.
- External commercial borrowing by SEZ units up to 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.
- Enhanced limit of Rs. 2.4 cores p.a. allowed for Managerial Remuneration