SPECIAL ECONOMIC ZONES

CONTENTS

What is SEZ? Types of SEZ SEZs in India SEZ rules Facilities provided to Developers of SEZ. Single window system Punjab and SEZ India v/s China

What is SEZ?

A geographical region that has economic laws more liberal than a country's typical economic laws.

Covers a broad range of more specific zone types, including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Ports etc.

Continued..

A spatial economic island where more liberal economic laws operate than outside that specified area.

Main objective to attract FDI by excluding a specified geographical area from the operation of certain tax laws and import and export laws.

Continued..

Confined to developing countries. No. of developing countries have

resorted to this strategy to attract FDI like China, India, Iran, Jordan, Poland, Kazakhstan etc.

In India, SEZ were started from April 2000.

In 2005 statutory status given to SEZs by enacting SEZ Act 2005.

Continued..

As on today 101 SEZs are in operation and in principle approval has been given for setting up another 117 SEZs.

The SEZ Act of 2005 allows SEZs to be set up in public sector, private sector, joint sector, by state governments and their agencies.

Types of SEZ

SECTOR SPECIFIC SEZs.

MULTI-PRODUCT SEZs.

Port/ Airport Based SEZs

Free Trade and Warehousing Zones

Continued..

SECTOR SPECIFIC SEZs. Defined as a zone meant exclusively

for one or more products or services in one sector.

Minimum area requirement is 100 hectares (reduced to 50 hectares for specified States and Territories).

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For Electronic hardware and software including IT/ITES, minimum area required is 10 Hectares with a minimum built up processing area of one lakh square meters.

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For biotechnology, non-conventional energy including solar energy equipments/cells, or gem and jewellery sectors, the minimum area requirement is 10 Hectares

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MULTI-PRODUCT SEZs - Signifies an SEZ where units may be

set up for manufacture of services of two or more goods/services in a sector or goods/services falling in two or more sectors.

Minimum area requirement for SEZ exclusively for services is 100 hectares.

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Minimum area requirement is 1000 hectares (reduced to 200 hectares for specified States and Territories like in Assam , Meghalaya, Nagaland, Mizoram, Manipur, J&K, Tripura , Sikkim , Himachal Pradesh and Uttranchal ).

Continued..

PORT/AIRPORT BASED SEZs Minimum area requirement is 100 hectares.

FREE TRADE AND WAREHOUSING ZONES (FTWZ}

Exemption from customs / excise duties for development of SEZs for authorized operations approved by the BOA

Income Tax exemption on export income for a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act

Continued..

Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act

Exemption from dividend distribution tax under Section 115O of the Income Tax Act

Exemption from Central Sales Tax (CST) Facilities / Incentive to SEZ Developer

List Of Formal Approval SEZ

List Of Principle Approved SEZ

Operational SEZ in India

Sector wise distribution of SEZ

State wise distribution of SEZ

SEZ Rules

Simplified procedures for development, operation, and maintenance, and also for setting up units and conducting business in SEZs;

Single window clearance for setting up an SEZ or setting up a unit in SEZ;

Single Window clearance on matters relating to Central as well as State Governments;

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Different minimum land requirement for different class of SEZs.

Demarcating the processing and non processing zones wherein the processing area comprise of the SEZ units and the non-processing area will host the supporting infrastructure.

Facilities provided to Developers of SEZ

100% FDI allowed for:

• townships with residential, educational and recreational facilities.

Income Tax exemption to developers for any block of 10 years in 15 years.

Continued..

Duty free import/domestic procurement of goods for development, operation and maintenance of SEZs.

Exemption from Service Tax and the Central Sales Tax

Guidelines issued on generation, transmission and distribution of power in SEZs

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Allocation of power to SEZs from central quota

Freedom in allocation of space and built up area to approved SEZ units on commercial basis.

Authorized to provide and maintain services like water, electricity, security, restaurants and recreation centeres on commercial lines.

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No license required for import.

In addition to manufacturing, trading and services are also allowed.

Freedom to subcontract.

Single window approval by Development Commissioner of the zone.

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Income Tax Act: 100% IT exemption (10A) for first 5 years,

50% for 2 years thereafter and 50% of reinvestment for 3 years

Permitted to carry forward losses

Offshore Banking Units allowed to have full IT exemption for 3 years and 50% for next two years.

Continued..

Service Tax: Exemption from Service Tax to SEZ units

Environment Permitted facilities like golf courses, hotels

and non-polluting service industries in the Coastal Regulation Zone area

Single window system

The Single Window System is a trade facilitation idea.

Its implementation of a single window system enables international (cross-border) traders to submit regulatory documents at a single location and/or single entity.

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•The main value proposition for having a Single Window for a country or economy is to increase the efficiency through time and cost savings for traders in their dealings with various government authorities for obtaining the relevant clearance and permit(s) for moving cargoes across national or economic borders

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In short. It is- "A facility that allows parties involved

in trade and transport to lodge standardized information and documents with a single entry point to fulfill all import, export, and transit-related regulatory requirements. “

Punjab and SEZs

Punjab enacted the SEZ Act in December 2009, formal approval has been given to four projects, while two have already been notified.

As for the proposed SEZ of DLF, the first in the state, which was to come up in Amritsar, uncertainties are yet to clear up.

Continued..

In March 08, Prime Minister Manmohan Singh launched real estate developer DLF Universal’s SEZ project.

DLF and the Punjab government had signed an MoU for the project, which got in-principle approval.

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This was to come up on 1,000 acres with an investment of Rs 453.69 crore over five years from the date of handing over the possession of land. But so far no activity has begun.

India V/S China

Strong Domestic Market

Contribution to Exports

Decentralization of Power

Flexible Labour Laws

India V/S China

Strong domestic market: In China, about 50 per cent of SEZ sales are to the domestic market.

Though India having large domestic market, has failed to project this to lure SEZ investors.

The reason: Policy impediments to sales in the domestic market. While in China the thrust of SEZs has been to attract foreign investments and modern technology, in India the emphasis has been on exports

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Contribution to exports In 2001, the share of the five SEZs in

the country's total exports was 10.4 per cent. In contrast, the of Indian SEZs in 2001-02 was a little over 4 per cent of the total exports.

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Decentralisation of power: In China. Provincial and local authorities were made partners and stakeholders, by delegating to them powers to approve foreign investment. The SEZ authorities in China can approve foreign investment proposals up to $30 million

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In India, only State governments are allowed to set up SEZs and the powers for foreign investment approvals are vested with the Development Commissioners, who are the representatives of the Central Government.

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•Flexible Labour Laws: The hire-and-fire policy in SEZs has been one of the biggest attractions for foreign investors in China.

•All jobs are on labour contract basis, which stand terminated upon the expiry of the terms, which can be fixed/flexible or for a specific job. In contrast, the labour policy in India is worker, rather than investment, oriented.

Latest news

SEZs will have to keep space for SSIs Have to reserve one tenth of production

space for SSIs. To allocate land to small scale industries.

As per news in Economic Times Dated- 19/01/10

Bibliography

Sezindia.nic.in www.dipp.nic .in

(department of industrial policy and promotion)

Wikipedia Economic Times

THANK YOU…..

God Bless All….!!!!