Knowledge Center

Mar 15

Posted by:MyEfilings
Benefits of SEZ Units in India

Before we discuss benefits of SEZ units in India, let us try and understand what SEZ units are.

Special Economic Zone (SEZ) is an area in which business and trade laws differ from the rest of the country. SEZ’s are actually located specifically within a country's national borders, and their aims usually include: Increased trade, increased investment, job creation and effective administration.

It is basically a geographical region that has economic laws that are more liberal than a country's domestic economic laws. India has specific laws for its SEZs.

The creation of Special Economic Zones by the host country may be motivated by the desire to attract Foreign Direct Investment (FDI). The benefits a company gains by being in a special economic zone may mean it can produce and trade goods at a lower price, aimed at being globally competitive. The performance of the SEZ units are monitored and looked over by a unit approval committee consisting of various officers like a development commissioner, custom and representative of state government on an annual basis.

At present there are eight functional SEZ units which are located at Santacruz (Maharashtra), Cochin (Kerala), Visakhapatnam (Andhra Pradesh), Falta (West Bengal),Kandla and Surat (Gujarat), Chennai (Tamil Nadu) and Noida (Uttar Pradesh) in India. Further a SEZ in Indore (Madhya Pradesh) is now ready for operation. 

Business units that set up establishments in an SEZ unit are usually entitled for a package of bonus incentives and a simplified operating environment. Besides this, no license is otherwise required for imports, including second hand machineries. 

Here are the benefits that are offered by SEZ Units that are listed below -

  • A 10-year tax holiday in a block of the first 20 years.
  • Exemption from excise / VAT on domestic sourcing of capital goods for project development.
  • No foreign ownership restrictions are applicable as such in the developing zone of infrastructure and no restrictions on repatriation.
  • Freedom to develop a township in to the SEZ inclusive of residential areas, markets, play grounds, clubs and recreation centres without any restrictions on any kind of foreign ownership as such.
  • Provision of Income tax holidays on any business income.
  • Exemption from import duty, as well as VAT and other Taxes.
  • 100% FDI allowed through the automatic route for all manufacturing activities carried out.
  • Procedural ease and efficiency for speedy approvals, clearances and customs procedures and dispute resolution.
  • Exemption from duties on all imports which is required for project development.
  • Simplification of procedures and self-certification in the labour acts.
  • Artificial harbour and handling of bulk containers that are made operational throughout the year.
  • Houses for both domestic and international air terminals to facilitate one in transit, to and fro from the major domestic and international destinations to be reached.
  • Has host of Public and Private Bank chains to offer financial assistance for business houses.
  • A vibrant industrial city with an abundant supply of skilled manpower, which covers the entire spectrum of industrial and business expertise.
  • Well connected with network of public transport, local railways and cabs for easy and feasible transportation.
  • An opportunity to have a complete pollution free environment with a proper drainage system and sewage system for disposal of the waste generated.
  • Facilities for clearance at In-house Customs.
  • Easy access to pick-up and drop facilities e.g., the airport and the local Railway Station.
  • Full authority to provide various services such as a supply of water, electricity, security, restaurants and recreational facilities which fall under the zone on purely commercial basis.
  • Exclusive supply of technically skilled manpower.
  • Abundant and extensive supply of semi-skilled labour across all sectors of the industry.

Listed below are the major incentives given to SEZ developers:

·         An exemption from a minimum alternate tax under Section 115 JB of the Income Tax Act, government of India.

·         An exemption from dividend distribution tax under Section 115O of the Income Tax Act.

·         An Exemption from Central Sales Tax (CST).

·         And lastly, an Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).


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