Know Everything about SEZ – Special Economic Zones – Tax Heaven of India

Know Everything about SEZ – Special Economic Zones – Tax Heaven of India -
Reality Views sm –
Thursday, July 01, 2010

Let’s understand and know about the SEZ, The Subsidy ka BAP.
Know 23 of Benefits – [Subsidies] Enjoyed by the SEZ – Special Economic Zones

In simple words I will tell you Special Economic Zone means
No Tax, No Duties, No Hurdles



Special Economic Zones (SEZs) Policy was announced in April 2000.
The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005.
The SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006
The SEZ Act 2005 envisages key role for the State Governments in Export Promotion and creation of related infrastructure.

SEZ is a special economic area where if someone opens the business he enjoys lot of benefits and ultimately he gets guarantee that he will become richer without doing any social service towards India.

Who can set up SEZ?
1.Central or State Government or both jointly
2.private and public company
3.Foreign company
4.Any person, who intends to set up a Special Economic Zone, may, after identifying the area, make a proposal to the State Government concerned for the purpose of setting up the Special Economic Zone.

Types of SEZ –

1.“Free Trade and Warehousing Zone” means a Special Economic Zone wherein mainly trading and warehousing and other activities related thereto are carried on

2.Special Economic Zone for multi-product” means a Special Economic Zone. where Units may be set up for manufacture of two or more goods in a sector or goods falling in two or more sectors or for trading and warehousing or rendering of two or more services in a sector or rendering of services falling in two or more Sector

3.Special Economic Zone for specific sector” means a Special Economic Zone meant exclusively for one or more products in a sector or one or more services in a sector.

4.“Special Economic Zone in a port or airport” means a Special Economic Zone in an existing port or airport for Special Economic Zone in an existing port or airport for Special Economic Zone.


SEZ was started in the name of inviting foreign companies in India to start business but reality is that Indian business houses are taking advantage of these facilities of SEZ.
SEZ units can also do contract work for domestic companies, provided all raw material including semi-finished goods and consumables including fuel is supplied by the DTA exporter.
In this case, the finished goods must be directly exported from the SEZ unit on behalf of the DTA exporter.
The export document is jointly in the name of the DTA unit and the SEZ unit.
The DTA exporter is eligible for refund of duty paid on the inputs by way of brand rate of duty drawback.
SEZ units can sell goods and services, including rejects and scrap or other by-products of the manufacturing process in the domestic market.


Objective of starting the SEZ in India –

(a) Generation of additional economic activity
(b) Promotion of exports of goods and services;
(c) Promotion of investment from domestic and foreign sources;
(d) Creation of employment opportunities;
(e) Development of infrastructure facilities;

Know 23 of Benefits – [Subsidies] Enjoyed by the SEZ – Special Economic Zones

1.Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units

2.100% 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.

3.Exemption from Central Sales Tax.

4.Exemption from Service Tax.

5.Freedom to carry forward losses for 8 years, thus providing tax shelter on losses incurred in the initial years.

6.All the input taxes i.e. Excise, Import duty, WCT, Electricity Duty & service tax, VAT (on inputs for manufacturing for export purposes) etc. are forever exempted in a SEZ.
7.Exemption from minimum alternate tax under section 115JB of the Income Tax Act.

8.Exemption from State sales tax and other levies as extended by the respective State Governments.

9.External commercial borrowing by SEZ units up to US $ 500 million in a year without any maturity restriction through recognized banking channels.

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

11.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.

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

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

14.Exemption from Central Sales Tax (CST).

15.Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).

16.exemption from any duty of customs, under the Customs Act, 1962 or the Custom Tariff Act, 1975 or any other law for the time being in force, on goods imported into, or service provided in, a Special Economic Zone or a Unit, to carry on the authorized operations by the Developer or entrepreneur;

17.exemption from any duty of excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorized operations by the Developer or entrepreneur;

18.exemption from service tax under Chapter-V of the Finance Act, 1994 on taxable services provided to a Developer or Unit to carry on the authorized operations in a Special Economic Zone;

19.exemption from the securities transaction tax leviable under section 98 of the Finance (No. 2) Act, 2004 in case the taxable securities transactions are entered into by a non-resident through the International Financial Services Centre;

20.Exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 if such goods are meant to carry on the authorized operations by the Developer or entrepreneur.

21.Profits allowed to be repatriated freely without any dividend -balancing requirement.

22.Information Technology Sezs do not require environment clearance for development of Sezs

23.No routine examination by customs of export and import cargo, thus providing for hassle-free operations.

With all these facilities who is becoming more rich in India.
Few important facts regarding growth of SEZ in India –

•Exports in 2008-09 – Rs. 99,689 Crore (Growth of 50% over 2007-08)
•Exports in 2009-10 -(As on 31st March, 2010)- Rs. 2,20,711.39 crore(Growth of 121.40% over 2008-09)

When they are making profits at the cost of Indian population why government do not cancel their exemptions?
Why government do not add clause that for every exemption they have to open school in that area or that city?

Jai Ho SEZ, Jai Ho Subsidy ka BAP