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:

  1. Central Government,
  2. State Government,
  3. Private Limited Company,
  4. Public Limited Company,
  5. 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:

  1. Duty free import/domestic procurement of goods for development, operation and
  2. maintenance of SEZ units
  3. 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
  4. Exemption from minimum alternate tax under section 115JB of the Income Tax Act.
  5. External commercial borrowing by SEZ units up to US $ 500 million in a year without any maturity restriction through recognized banking channels.
  6. Exemption from Central Sales Tax. Exemption from Service Tax.
  7. Single window clearance for Central and State level approvals.
  8. Exemption from State sales tax and other levies as extended by the respective State Governments.
  9. Enhanced limit of Rs. 2.4 cores p.a. allowed for Managerial Remuneration