Incentives and Facilities to SEZ Developer

The incentives and facilities offered to the units in SEZs for attracting investments into 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 years.
  
• Exemption from minimum alternate tax under section 115JB of the Income Tax Act.
  
• External commercial borrowing by SEZ units upto 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.
  

The major incentives and facilities available to SEZ developers include:-

• Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA.
  
• Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act.
  
• 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).
  
• Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).
  

Operational Special Economic Zones in India

To view list of Operational Special Economic Zones in India,Click here

Approved Special Economic Zones in India

To view list of Approved Special Economic Zones in India,Click here

FDI Policy on SEZ

FDI up to 100% is allowed through the automatic route for all manufacturing activities in Special Economic Zones (SEZs), except for the following activities:

• Arms and ammunition, explosives and allied items of defence equipment, defence aircraft and warships
• Atomic substances
  
• Narcotics and psychotropic substances and hazardous chemicals
  
• Distillation and brewing of alcoholic drinks
  
• Cigarettes/cigars and manufactured tobacco substitutes
  
• Sectoral norm as notified by Government shall apply to foreign investment in services

SEZ Act 2005

Special Economic Zone Act 2005 came into force with effect from 10th February 2006, with SEZ rules legally vetted and approved for notification. It is an act to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. The SEZ rules provide for drastic simplification of procedures and for single window clearance on matters relating to Central as well as State Governments.

The salient features of the Special Economic Zone Act 2005 are highlighted here:

• Exemption from customs duty, excise duty, etc. on import/domestic procurement of goods for the development, operation and maintenance of SEZs, and the units therein.
  
• 100 percent income tax exemption for 5 years, 50 percent for the next five years and 50 percent of ploughed back export profits for five years thereafter for SEZ units.
  
• Exemption from capital gains on transfer of an undertaking from an urban area to SEZ.
  
• 100 percent income tax exemption to SEZ developers for a block of 10 years in 15 years.
  
• Exemption from dividend distribution tax to SEZ developers
  
• 100 percent income tax exemption for 5 years and 50 percent for the next five years for offshore banking units located in SEZs
  
• A provision for setting up of International Financial Services Centre in SEZ has been proposed with the same incentives and facilities as available to offshore banking units.
  
• Exemption to SEZ developer and units from Minimum Alternate Tax
  
• CST Exemption to SEZ developer and units on inter-state purchase of goods
  
• Constitution of an authority for each SEZ with a view to providing greater administrative, financial and functional autonomy to these zones. However, no such authority is envisaged for an SEZ established by any person or State Government.
  
• Establishment of designated courts and a single enforcement agency to ensure speedy trial and investigation of offences committed in SEZs.
  
• Encouragement to State Governments to liberalize State laws and delegate their powers to the development commissioners of the SEZ to facilitate single window clearance.

Full text of the SEZ Act 2005

Develop SEZs

Setting up of SEZ

To download application form for setting up of SEZ Enterprise in India Click here

How to Apply

Any individual, co-operative society, company or partnership firm can file an application for setting up of Special Economic Zone. The application is to be made in Form-A to the concerned State Government and the Board of Approval (BOA) in the Department of Commerce, Government of India. However the application would be considered by the BOA only when the State Government recommendation is received.

Minimum area requirements for setting up a SEZ are as follows:

Once the BOA gives formal approval and the concerned Development Commissioner gives an inspection report certifying the contiguity and vacancy of the area, the area is notified as SEZ.

Useful Web Links

Special Economic Zones , Ministry of Commerce and Industry,Department of Commerce