UPSC: SPECIAL ECONOMIC ZONES
Special Economic Zones Act, 2005, envisages that the SEZs would attract a large flow of foreign and domestic investment in infrastructure and productive capacity leading to generation of additional economic activity and creation of employment opportunities.
A SEZ is a designated duty free enclave to be treated as foreign territory for the purpose of trade operations and duties and tariffs.
A SEZ does not require a license for imports. Other notable features are as follows:
- The units must become net foreign exchange earners within 3 years
- SEZ are allowed manufacturing, trading and service activities.
- Full freedom for subcontracting.
- The domestic sales from the SEZ are subject to full custom duties and import policy is in force, when they sell their produce to domestic markets.
- There was no routine examination by the custom authorities.
- The corporation in SEZs will not have to pay any income tax on their profits for the first five years and only 50% of the tax for 2 more years thereafter.
- If half of the profit is reinvested in the corporation, the concession of 50% tax is extendable for next 3 years.
- For SEZ developers , the raw material from cement to steel to electrical parts are subject to zero tax and duty.
- For the SEZ, the Government acquires vast land tracts and gives to the developers. The basic condition involves that 25% of the area of the SEZ must be used only for export related activities. Rest 75% area can be used for economical and social infrastructure. However, all SEZ benefits are applicable over the entire SEZ area.