SEZ
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What are Special Economic Zones (SEZs)?

  • Currently, they are defined as tax and duty free enclaves and are deemed to be foreign territory for purposes of taxes, duties and trade.
  • Many tax and duty incentives have been offered to these units and developers in the current SEZ policy to help them attract investments, and in turn, generate employment and boost exports.
  • Incentives offered to these units include duty-free import and duty-free domestic procurement of goods for their development, operation and maintenance.
  • They are also exempted from Central Sales Tax (CST), service tax and State sales tax.
  • Currently, there is no excise duty on raw material procurement  by SEZs from Domestic Tariff Area (or DTA, which is the area outside the SEZs but within India) as such procurement is treated as exports from DTA to SEZ.
  • Export Promotion Council for Export Oriented Units and SEZs (EPCES) is the apex body for EOUs and SEZs.
  • They come under the Department of Commerce, Ministry of Commerce and Industry.
  • The SEZ Act, 2005 supported by SEZ rules, came into effect in 2006.
  • The main objectives of the SEZ Act are:
  1. Generation of additional economic activity.
  2. Promotion of exports of goods and services.
  3. Promotion of investment from domestic and foreign sources
  4. Creation of employment opportunities.
  • These units contribute about 16 percent to the country’s total outbound shipments.

SEZ and GST

  • Parliament has recently passed the amended GST Bill.
  • The new regime will subsume central and state level taxes and will include a Central GST, IGST for inter-state supplies and SGST for intra-state supplies.
  • The SEZ sector is concerned about the lack of clarity in the proposed Goods & Services Tax (GST) regime on the continuation of tax and duty exemptions.
  • The Government may have to amend the Act to align it with the GST law so that central excise and service tax benefits can be extended to developers and entrepreneurs.
  • Section 26 of the Act which has to be amended talks about exemptions, drawbacks and concessions to every developer and entrepreneur.

Difference between SEZ and EOU

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