Quoting from the famous online dictionary Wikipedia, special economic zone is a “geographical area that has economic laws that are more liberal than a country’s typical economic laws”. The goal here is basically to boost foreign investment. With the passage of time SEZ (special economic zones) have managed to gain popularity and today it seems to be the flavour of the season. Special economic zones have been developed in many countries around the world.
Among them to name a few, the countries are as follows People’s Republic of China, Jordan, Iran, Poland, Kazakhstan, Philippines, Russia, and India. The United states of America refer to the special economic zones as “Urban enterprise zones”. 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, duties and tariffs.
In order to improve the export potential of a country (eg.India) and to make the domestic enterprises’ business sector compete globally, the government of India in April 2000 announced the Special Economic Zones policy in the country. The policy provides the benefits to set up SEZs in the public, private, joint sectors or by the state governments. The existing Export Processing zones would be converted into special economic zones. Accordingly, the Government has converted Export Processing Zones located at Kandla and Surat (Gujarat), Cochin (Kerala), Santa Cruz (Mumbai-Maharashtra), Falta (West Bengal), Madras (Tamil Nadu), Visakhapatnam (Andhra Pradesh) and Noida (Uttar Pradesh) into a Special Economic Zones. In addition, 3 new Special Economic Zones approved for establishment at Indore (Madhya Pradesh), Manikanchan – Salt Lake (Kolkata) and Jaipur have since commended operations. In addition, approval has been given for setting up of 42 Special Economic Zones in various parts of the country in the private/joint sectors or by the State Government.
In order to improve the export potential of a country (eg.India) and to make the domestic enterprises’ business sector compete globally, the government of India in April 2000 announced the Special Economic Zones policy in the country. The policy provides the benefits to set up SEZs in the public, private, joint sectors or by the state governments. The existing Export Processing zones would be converted into special economic zones. Accordingly, the Government has converted Export Processing Zones located at Kandla and Surat (Gujarat), Cochin (Kerala), Santa Cruz (Mumbai-Maharashtra), Falta (West Bengal), Madras (Tamil Nadu), Visakhapatnam (Andhra Pradesh) and Noida (Uttar Pradesh) into a Special Economic Zones. In addition, 3 new Special Economic Zones approved for establishment at Indore (Madhya Pradesh), Manikanchan – Salt Lake (Kolkata) and Jaipur have since commended operations. In addition, approval has been given for setting up of 42 Special Economic Zones in various parts of the country in the private/joint sectors or by the State Government.
The term ‘special’ in special economic zones denotes the zones having special economic systems and policies. In the People's Republic of China, the central government gives SEZs special policies and flexible measures, allowing SEZs to utilize a special economic management system. Some of the SEZ in China are Guangdong province: Shenzhen, Zhuihai, Shantou. Fujian province : Xiamen. Ashtana in Kazakhstan, Sarakhs , Sirjan, Bandar Anzali in Iran, Subic Bay Metropolitan Authority and Clark Special Economic Zone in Phillipines.
There are certain terms and conditions to follow while setting up SEZ in India.Some such rules are as follows:
There are certain terms and conditions to follow while setting up SEZ in India.Some such rules are as follows:
· Only units approved under SEZ scheme would be permitted to be located in SEZ.
· The SEZ units shall abide by local laws, rules, regulations or bye-laws in regard to area planning, sewerage disposal, pollution control and the like. They shall also comply with industrial and labour laws as may be locally applicable.
· Such SEZ shall make security arrangements to fulfill all the requirements of the laws, rules and procedures applicable to such SEZ.
· The SEZ should have a minimum area of 1000 hectares and at least 25 % of the area is to be earmarked for developing industrial area for setting up of units.
· Minimum area of 1000 hectares will not be applicable to product specific and port/airport based SEZs.
· Wherever the SEZs are landlocked, an Inland Container Depot (ICD) will be an integral part of SEZs.
SEZs can boast of various facilities, hence they are termed as special. Some such facilities are as follows:
Customs and Excise :
· SEZ units may import or procure from the domestic sources, duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment, DG sets etc. for implementation of their project in the Zone without any license or specific approval.
· Duty free import/domestic procurement of goods for setting up of SEZ units.
· Goods imported/procured locally duty free could be utilized over the approval period of 5 years.
· Domestic sales by SEZ units will now be exempt from SAD.
· Domestic sale of finished products, by-products on payment of applicable Custom duty.
· Domestic sale rejects and waste and scrap on payment of applicable Custom duty on the transaction value.
Income tax:
· Physical export benefit: 100% IT exemption (10A) for first 5 years and 50% for 2 years thereafter.
· Reinvestment allowance to the extend of 50% of ploughed back profits Carry forward of losses.
Foreign Direct Investment :
· 100% foreign direct investment is under the automatic route is allowed in manufacturing sector in SEZ units except arms and ammunition, explosive, atomic substance, narcotics and hazardous chemicals, distillation and brewing of alcoholic drinks and cigarettes , cigars and manufactured tobacco substitutes.
Banking / Insurance/External Commercial Borrowings:
· Setting up Off-shore Banking Units allowed in SEZs.
· External commercial borrowings by units up to $ 500 million a year allowed without any maturity restrictions.
· Freedom to bring in export proceeds without any time limit.
· Flexibility to keep 100% of export proceeds in EEFC account. Freedom to make overseas investment from it.
· Commodity hedging permitted.
· Exemption from interest rate surcharge on import finance.
· SEZ units allowed to 'write-off' unrealized export bills.
Central Sales Tax Act:
· Exemption to sales made from Domestic Tariff Area to SEZ units.Income Tax Act:
Service Tax:
· Exemption from Service Tax to SEZ units
Environment:
· SEZs permitted to have non-polluting industries in IT and facilities like golf courses, desalination plants, hotels and non-polluting service industries in the Coastal Regulation Zone area
· Exemption from public hearing under Environment Impact Assessment Notification
· The SEZ units shall abide by local laws, rules, regulations or bye-laws in regard to area planning, sewerage disposal, pollution control and the like. They shall also comply with industrial and labour laws as may be locally applicable.
· Such SEZ shall make security arrangements to fulfill all the requirements of the laws, rules and procedures applicable to such SEZ.
· The SEZ should have a minimum area of 1000 hectares and at least 25 % of the area is to be earmarked for developing industrial area for setting up of units.
· Minimum area of 1000 hectares will not be applicable to product specific and port/airport based SEZs.
· Wherever the SEZs are landlocked, an Inland Container Depot (ICD) will be an integral part of SEZs.
SEZs can boast of various facilities, hence they are termed as special. Some such facilities are as follows:
Customs and Excise :
· SEZ units may import or procure from the domestic sources, duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment, DG sets etc. for implementation of their project in the Zone without any license or specific approval.
· Duty free import/domestic procurement of goods for setting up of SEZ units.
· Goods imported/procured locally duty free could be utilized over the approval period of 5 years.
· Domestic sales by SEZ units will now be exempt from SAD.
· Domestic sale of finished products, by-products on payment of applicable Custom duty.
· Domestic sale rejects and waste and scrap on payment of applicable Custom duty on the transaction value.
Income tax:
· Physical export benefit: 100% IT exemption (10A) for first 5 years and 50% for 2 years thereafter.
· Reinvestment allowance to the extend of 50% of ploughed back profits Carry forward of losses.
Foreign Direct Investment :
· 100% foreign direct investment is under the automatic route is allowed in manufacturing sector in SEZ units except arms and ammunition, explosive, atomic substance, narcotics and hazardous chemicals, distillation and brewing of alcoholic drinks and cigarettes , cigars and manufactured tobacco substitutes.
Banking / Insurance/External Commercial Borrowings:
· Setting up Off-shore Banking Units allowed in SEZs.
· External commercial borrowings by units up to $ 500 million a year allowed without any maturity restrictions.
· Freedom to bring in export proceeds without any time limit.
· Flexibility to keep 100% of export proceeds in EEFC account. Freedom to make overseas investment from it.
· Commodity hedging permitted.
· Exemption from interest rate surcharge on import finance.
· SEZ units allowed to 'write-off' unrealized export bills.
Central Sales Tax Act:
· Exemption to sales made from Domestic Tariff Area to SEZ units.Income Tax Act:
Service Tax:
· Exemption from Service Tax to SEZ units
Environment:
· SEZs permitted to have non-polluting industries in IT and facilities like golf courses, desalination plants, hotels and non-polluting service industries in the Coastal Regulation Zone area
· Exemption from public hearing under Environment Impact Assessment Notification
Whatever the verdict or the jurisdiction of the land governs , SEZ has finally hit India big time and it is here to stay now that many major companies of the land from reliance to Bajaj to the Birlas ,all are investing their moolah’s worth in the development of SEZs in India. Many foreign investors are also directing their rafts to our South Asian country, India. It is only a matter of time before we reap the benefits or the wrath of SEZ establishment in India!
:something written by me..published in the yearbook of college-'Shrusti' in 2007
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