The Special Economic Zones (SEZ) Act.pptx

The Special Economic Zones (SEZ) Act

1. The Special Economic Zones (SEZ) Act, 2005 Name - Saksham K. Verma Roll No. - 190823003

2. The SEZ Act of 2005, enacted by the Indian Parliament, outlines the creation, growth, and governance of Special Economic Zones across India. These zones are subject to unique economic policies distinct from the nation’s standard laws, with the objectives of enhancing export activities and creating job opportunities. An SEZ is an enclave within a country that is typically duty-free and has different business and commercial laws chiefly to encourage investment and create employment. Apart from generating employment opportunities and promoting investment, SEZs are created also to better administer these areas, thereby increasing the ease of doing business. Introduction

3. The SEZ Act of 2005 highlights several core aspects: Establishment of SEZs: It authorizes the formation of SEZs by various governmental bodies or notified individuals/entities. Operational Framework: The Act ensures the systematic development, management, and operation of SEZs, along with the necessary infrastructure and amenities. Economic Benefits: It offers a range of financial advantages like duty-free periods, customs duty exemptions, and tax concessions to boost investments and exports. Streamlined Procedures: A single-window clearance system is established to expedite the SEZ setup and operational processes, minimizing red tape. Regulatory Relaxations: Certain labor regulations are relaxed within SEZs to enhance operational flexibility. Disengagement Strategy: There’s a provision for an exit strategy, permitting units within SEZs to disengage and liquidate their assets under specific scenarios. Introduction

4. The establishment of SEZs aims to boost foreign investment by offering a globally competitive and smooth export environment. They are created to enhance the country’s exports, ensuring domestic businesses and manufacturers can compete on an international scale. SEZs are equipped with state-of-the-art infrastructure such as water, electricity, roads, transportation, and storage to entice foreign investors. They are crucial in propelling the nation’s swift economic progress. Requirements of SEZ

5. The Rules provide for: Simplified procedures to develop, operate and maintain SEZs and also to set up units and conduct businesses in the SEZs. Single-window clearance to set up a Special Economic Zone, and also to set up a unit in an SEZ. Single-window clearance for matters connected to the Central and State governments. Simplified compliance procedures and documentation with a focus on self-certification. Different minimum land requirements for different classes of Special Economic Zones. SEZ Rules

6. SEZ Types Special Economic Zones (SEZs) come in various forms (based on their functional attributes and the specific industry sectors they serve): Multi-product SEZs: These zones support a broad spectrum of industries, fostering economic diversity and advancement without being confined to particular sectors. Sector-specific SEZs: Concentrated on designated sectors like IT/ITES, electronics, pharmaceuticals, textiles, and jewelry, these SEZs deliver custom infrastructure and facilities to meet sector-specific needs. Free Trade and Warehousing Zones (FTWZs): Primarily centered on warehousing and distribution, FTWZs aim to streamline international trade and offer logistic solutions. Port-based SEZs: Situated adjacent to ports, these zones specialize in serving the export-import industry with tailored cargo management facilities.

7. SEZs Facilities & Incentives The government offers many incentives for companies and businesses established in SEZs. Some of the important ones are: Duty-free import or domestic procurement of goods for developing, operating and maintaining SEZ units. 100% Income tax exemption on export income for SEZ units under 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. (Sunset Clause for Units will become effective from 2020). Units are exempted from Minimum Alternate Tax (MAT).

8. SEZs Facilities & Incentives They were exempted from Central Sales Tax, Service Tax and State sales tax. These have now subsumed into GST and supplies to SEZs are zero-rated under the IGST Act, 2017. Single window clearance for Central and State level approvals. There is no need for a license for import. In the manufacturing sector, barring a few segments, 100% FDI is allowed. Profits earned are permitted to be repatriated freely with no need for any dividend balancing. There is no need for separate documentation for customs and export-import policy. Many SEZs offer developed plots and ready-to-use space.

9. Challenges related to SEZs Since SEZs offer a wide range of incentives and tax benefits, it is believed that many existing domestic firms may just shift base to SEZs. There is a fear that the promotion of SEZs may be at the cost of fertile agricultural land affecting food security, loss of revenue to the exchequer and cause uneven growth with adverse effects. Apart from food security, water security is also affected because of the diversion of water use for SEZs. SEZs also cause pollution, especially with the release of untreated effluents. There has been a huge destruction of mangroves in Gujarat affecting fisheries and dairy sectors. SEZs have to be promoted but not at the cost of the agricultural sector of the country. It should also not affect the environment adversely.

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