What is a Special Economic Zone (SEZ)?

Special Economic Zones (SEZs) can be defined as designated areas within a country that aim to improve economic growth through unique regulatory measures. It is separated from the national laws applicable elsewhere in the country. These are designed specifically to attract foreign direct investment (FDI), create employment, promote exports, and boost industrial output.

Key Features of SEZ

Key features of SEZ include:

• Designated territory
• Export-oriented mandate
• Separate regulatory regime
• 100% FDI permitted
• Investor-friendly regulations
• Modern infrastructure
• Duty-free zone
• Tax incentives
• Employment generation
• Strong brand credibility

What is the Special Economic Zone Act?

The Special Economic Zones Act, 2005 (SEZ Act) is the principal legislation that regulates the establishment, regulation, and operation of SEZs in India. On June 23, 2005, the act was enacted by the Parliament and came into effect from February 10, 2006. The SEZ Act provides a comprehensive legal framework for both SEZ developers and unit operators.

Types of Special Economic Zones (SEZs)

The SEZ framework of India includes a variety of zone types, each designed to meet specific industry requirements, geographic advantages, and trade objectives.

• Multi-Product SEZ: It hosts a wide range of industries, including IT, logistics, manufacturing, and services, within a single zone.
• Free Trade Zone (FTZ): A duty-free zone for the storage, import, and re-export of goods with minimal processing.
• Sector-Specific SEZ: This zone is dedicated to a single sector, such as electronics, IT, gems, or textiles.
• IT/ITES SEZ: This zone is exclusively for ITES, IT software, and BPO sectors. It is prevalent across all Indian cities.
• Port-Based SEZ: This Special Economic Zone is located near major ports. It is designed for export-intensive manufacturing and logistics.
• Industrial Park: A planned manufacturing zone with shared infrastructure for large industries and SMEs.
• Export Processing Zone (EPZ): This zone is a predecessor to modern SEZs. It exclusively focused on export-oriented manufacturing.

Facilities in Special Economic Zones (SEZs)

The SEZ Act, 2005, and the IGST Act, 2017, offer a wide range of regulatory, fiscal, and infrastructure benefits to SEZ units and developers.

• Income tax exemption units
• GST/ Indirect tax
• FDI
• Customs/ Import duty
• No requirement for an import license
• MAT (Minimum Alternate Tax)
• Repatriation of profits
• Developer incentives
• Single-window clearance
• Developer incentives

How to Set Up a Business Unit in a Special Economic Zone in India?

Starting a business within a Special Economic Zone (SEZ) includes the following process:

• Choose the SEZ type and sector
• Select the SEZ location
• Apply to the development commissioner
• Obtain a letter of approval (LOA)
• Register under the SEZ Act
• Comply with Net Foreign Exchange (NFE) rules
• Finance your SEZ setup