Special Economic Zone (SEZ) is deemed to be a foreign territory for trade operations; duties and tariffs. In other words, SEZ is a geographical region that has different economic laws from a country’s. The goal is to increase foreign investments to increase the GDP of the country.
With Asia’s first Export Processing Zone (EPZ) set up in Kandla in 1965, India was one of the first in Asia to recognize the need & effectiveness of the (EPZ) model in promoting exports. To overcome the shortcomings experienced on account of the multiplicity of controls and clearances; the absence of proper infrastructure, and an imbalance fiscal regime and to attract large foreign investments in India, the Special Economic Zones (SEZs) Policy which was announced in April 2000.
The government of India has framed a policy regulation that allows the private sector to establish Special Economic Zones (SEZ) to promote export-oriented manufacturing and delivery of services at competitive costs. Units operating in Special Economic Zones are entitled to direct and indirect tax benefits for a specified time period. The procedures have been simplified under Fiscal and foreign exchange and 100 per cent foreign investment is allowed for setting up units in SEZs. Operating in SEZs is expected to help reduce the manufacturing costs.
For the economic growth of SEZ both at the Centre and State level, this policy will support the quality infrastructure of the SEZs. The development will be with nominal regulations along with subsidiary fiscal package. SEZs in India under the provisions of the Foreign Trade Policy and fiscal incentives were made effective through the provisions of relevant statutes.
The Parliament passed the Special Economic Zones Act, 2005 in May 2005 which also received Presidential assent on the 23rd of June, 2005. The drafted SEZ Rules were put on the website of the Department of Commerce which offered suggestions & comments. Around 800 suggestions were received on the drafted rules. Rigorous consultations, on the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February 2006 which provided drastic simplification of procedures for single window clearance on matters relating to central and state governments as well. To generate additional economic activity is one of the objective of SEZ act. It also includes the promotion of exports for goods and services, investment from both domestic and foreign sources. Along with this the generation of employment opportunities.
It is expected that this will enable a large flow of foreign and domestic investment in SEZs, in infrastructure and productive capacity, which will lead to the generation of additional economic activity and the creation of a generation of employment opportunities.
The Special Economic Zones Rules includes:
- SEZs should have a simplified procedure for the development and its operation and maintenance
- The set up of units and conducting business in SEZs
- There should be a single-window clearance for setting up of the SEZ and its business units
- There should be a single-window clearance on matters relating to Central and State Governments
- There should be simplified self-certification compliance procedures and documentation