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Tuesday, November 27, 2012

What is Special Economic Zone (SEZ)

What is SEZ ?
What is so “Special” about Special Economic Zone (SEZ) ?
1.       Special Economic Zone (SEZ) is a special duty-free enclave designed to promote foreign investments in a comprehensive range of economic activities from manufacturing at one end to trading and financial services on the other in an unfettered business environment. It is special because:
a.       Under a special policy dispensation promulgated by the Central Government as recently as in April 2000, businesses will operate under high quality policy and business like and friendly regulatory environment free of hassles and rend tapism. In other words, the operation of the normative and restrictive business/commercial laws will be suspended. Operating entities will be free to pursue their business interests free of Government intervention.
b.      The SEZ will provide high quality and world-class infrastructure designed to render costs of products, delivery, logistics and transactions competitive on global basis.
c.       While SEZ will be insulated from the domestic tariff are in so far as the negative influences are concerned, it will non the less provide the much sought and “privileged” access to the domestic markets.
Special Economic Zone
Salient Features
·         A Designated duty free enclave and to be treated as foreign territory for trade operations and duties and tariffs.
·         Units are free from plethora of rules and regulations governing import and export.
·         Units are able to import capital goods and raw materials duty free from abroad. And also from DTA without payment of terminal excise duty.
·         No wastage norms or input-output norms.
·         SEZ units would be able to undertake job work from the DTA units and also to get their goods processed in the DTA.
·         Sales within DTA area permitted only on payment of applicable customs duties.
·         No routine examination by customs of export and import cargo.
·         No separate documentation required for customs and exim policy.
·         Corporate tax holiday upto 2010 U/S. 10-A of the Income Tax Act.
·         No licence required for imports.
·         Supplies from DTA to SEZ units treated as deemed exports.
·         Reimbursement of central sales tax paid on domestic purchases.
·         SEZ units may be for manufacturing, trading or service activity.
·         100% Foreign direct investment in manufacturing sector allowed through automatic route.
·         Profits allowed to be repatriated freely without any dividend balancing requirements.
·         No industrial licensing restrictions on products reserved for Small Scale Sector.
Uniqueness of SEZ in India
Distinctive underpinnings
1.       The SEZ policy framework is the most visionary, ambitious and far-reaching initiative of the Government of India (GOI) so far designed to transform fundamentally the “Foreign Direct Investment (FDI) Landscape” for all times to come. It is designed to provide complete business freedom to large multinational companies which are seeking to globalize their production bases.
2.       The central and distinctive anchors of the SEZ policy framework in  India cover the following themes :
i.              100% tax break/holiday for ten years upto 2010 (in other countries, tax reliefs are regulated).
ii.                  Unrestricted access to domestic markets (with payment of applicable duties/taxes)
iii.                The permissible economic activity in SEZ is vast and it covers trading, servicing,
iv.                 100% foreign ownership automatically cleared in the manufacturing sector. The Chinese SEZs for long have insisted on the joint venture with local partners.
v.                   100% foreign investments automatically cleared in the manufacturing sector. 

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