Special Economic Zones as Growth Engines

Topics: International trade, Gujarat, Special Economic Zone Pages: 24 (6050 words) Published: March 19, 2011
Part - A
Special Economic Zones

Special Economic Zones: Special Economic Zones (SEZs) are growth engines that can boost manufacturing, augment exports and generate employment. The private sector has been actively associated with the development of SEZs. The SEZs require special fiscal and regulatory regime in order to impart a hassle free operational regime encompassing the state of the art infrastructure and support services. The proposed legislation on SEZs to be enacted in the near future would cover the concepts of the developer and co-developer, incorporate the provision of virtual SEZs, have fiscal concessions under the Income Tax and Customs Act, provide for Offshore Banking Units (OBUs) etc. Special Economic Zones schemes in India was conceived by the Commerce and Industries Minister Murosoli Maran during a visit to Special Economic Zones in China in 1999. The scheme was announced at the time of annual review of EXIM Policy effective from 1-4-2000. 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. Under the Special Economic Zone Scheme announced in 2000, 4 existing EPZs were converted into SEZ and 13 new SEZs were given approval (as on 31-03-2002). The Exim Policy 2002-07 has offered several fiscal incentives to units in the SEZs. Other proposals included exemption to SEZ units from External Commercial Borrowings restrictions, and, freedom to make overseas investment and carry out commodity hedging. Features:

A.Export and Import Goods and services going into the SEZ area from DTA shall be treated as deemed exports and the domestic supplier are eligible for deemed export benefit. Similarly, goods and services coming from the SEZ area into DTA shall be treated as if goods are being imported. The entire production of SEZs units must be exported and D TA sale is permitted only on the payment of full applicable customs duties. B.Activities permissible SEZ units may be set up for manufacture of goods and rendering of services , production , processing , assembling , trading, repair, remaking, reconditioning , re-engineering including making of gold , silver, or platinum jewellery and articles thereof. Units for generation and distribution of power may also be permitted in SEZs. C.Foreign Direct Investment: FDI upto 100% is allowed through automatic route for all manufacturing activities. Arms and ammunition and other items of defence.

Narcotic and psychotropic substances.
Hazardous chemical.
Distillation and brewing of alcoholic drinks
Cigarettes and tobacco.

D.Entitlement for SEZ developer: For development ‘ operation and maintenance of infrastructure facilities in SEZs , the developer shall be eligible for the following entitlements. Income tax exemption as per 80 IA of IT act.

Import /procure goods without payment of custom and excise duty. Exemption from service tax.

E.Entitlement for supplier from DTA to SEZ: Incase of supplier from DTA to SEZ , the DTA supplie hall be entitled for the following: Drawback or DEPB in lieu of drawback.
Discharge of export performance , if any, on the supplier. In case of supplier from DTA to SEZ , the SEZ unit shall be entitled for following: Exemption from Central Sales Tax.
Exemption from payment of central Excise Duty on all goods eligible for procurement by the unit.

F.Other Entitlements:
Support services like banking, post office, clearing agent etc . provided in zone complex. Realization of exports proceeds extended to 12 months from the date of export. State Trading Enterprise Policy will not apply to SEZ manufacturing units..

Foreign Trade Policy related to SEZs
The salient features of the Foreign Trade Policy, 2004 — 09, related to SEZs are the following. Goods and services going into the SEZ area from DTA shall be treated as exports and goods coming from the SEZ area into...
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