Salient features of SEZs
Mentioned below are some of the salient features of Indian Special Economic Zones:
- Indian SEZs are developed by government, private and joint sector, unlike its international counterparts where zones are chiefly maintained by their respective governments. This provides equal prospects to both Indian and global players.
- Government has allocated a least favorable area of 1,000 hectares for greenfield SEZs. Although, there are no limitation in context of favorable area in constructing sector specific SEZs.
- 100% of Foreign Direct Investment is allowed for all endowments in Special Economic Zones, apart from activities cataloged under the unconstructive record.
- SEZ divisions are obligatory to be encouraging net foreign exchange yielders and are not entitle to any least amount of value addition guidelines or export responsibilities.
- Commodity surge from Domestic Tariff Area (DTA) into a SEZ is recognized as exports and commodity surge into DTA from SEZ are recognized as imports.
Benefits of SEZs
Besides offering high end infrastructure and availability to a large skilled workforce, SEZ also offers attractive incentives and advantages to firms and developers. Mentioned below are some of the benefits of Indian Special Economic Zones:
- Full Income tax exemption for a period of 5 years and an extra 50% tax relief for additional two years.
- Manufacturing industry is allowed an FDI influx of 100% via automatic channels excluding few industries.
- Services to establish off-shore banking divisions in SEZs
- Service Tax and Central Sales Tax exemption
- External commercial lending of upto US$500 million is allowed for SEZ divisions in a year sans any maturity limitations via certified banking networks.
- No import authorization obligations.
- Services to sustain foreign exchange proof of payments of upto 100% in Exchange Earners’ Foreign Currency Account.
- SEZ franchisees are allowed 100% FDI in offering customary telephone facilities in the areas.
- No limitation of foreign endowments for small scale industry reticent products.
- Tax relief from sectoral authorization obligations for goods reticent for SSI industry
- Tax relief from custom tariff on import of merchandise, raw products, spare parts etc
- Tax relief from Central Excise tariff on acquirement of merchandise, raw products, spare parts etc from the local market
- No regular assessments by Customs for export and import freight.
- Capacity to comprehend and repatriate export advances within a year.
- Revenues permitted to be repatriated sans any dividend assessment needs
- Authorization for Employment prospects on behalf of local exporters for direct export.
- Authorization for off-shoring of local and global players. This service is accessible to jewelry sector also.
Mechanism of setting of SEZ
There are 3 channels in getting a SEZ establishing permission India as follows:
- Channel 1
The company (developer) which wants to establish the SEZ shall make the proposal to the government. Then, the government sends the proposal with suggestions to the Board of Approval for the consideration within 45 days commencing from the proposal date of the request made by the company. The approval from the Board shall carry out within 30 days. The company receives the letter issued by the federal government. Later, the company shall inform the details of the necessary information requested to the federal government.
- Channel 2
The developer can directly submit the proposal through the Board of Approval. The developer will receive the approval within six months from the date of receiving the proposal. The other processes will be the same as Channel 1.
- Channel 3
The federal government announced for SEZ proposal development from developers in a designated area. By the Special Economic Zone Act 2005, the approval board comprises of 19 members selected by the federal government. However, Ministry of Commerce and Industry is the president of the board. Others are from the government authorities and agencies.