SEZ (Special Economic Zones)

Context:

  • Presently, there are 425 formally approved Special Economic Zones (SEZs) in the country.
  • As on date, 376 SEZs are notified and 268 SEZs are operational.
  • SEZs are primarily private investment driven initiatives.
  • The delay in setting up of and operationalizing SEZs could be attributed to several reasons including adverse business climate due to changed global economic situation, changes in fiscal incentives, etc.

About:

  • Duty-free import/domestic procurement of goods for development, operation and maintenance of 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 are effective from 01.04.2020)
  • Exemption from Minimum Alternate Tax (MAT). (withdrawn w.e.f. 1.4.2012)
  • Exemption from Central Sales Tax, Exemption from Service Tax and Exemption from State sales tax. These have now subsumed into GST and supplies to SEZs are zero rated under IGST Act, 2017.
  • Other levies as imposed by the respective State Governments.
  • Single window clearance for Central and State level approvals.

 

Concerns with present SEZ:

 

  • SEZs in India have not been as successful as their counterparts in many other countries. Several Asian economies, particularly China, Korea, Malaysia, and Singapore, have greatly benefited from these zones.
  • Most of India’s new generation SEZs came up not for exporting, but for avoiding taxes. Large fiscal sops, in the form of a bunch of reliefs from central and state taxes, lured developers into building SEZs.
  • Most manufacturing SEZs in India have performed below par due to their poor linkages with the rest of the economy.
  • Weak connections of coastal SEZs with their hinterlands inhibited these zones from utilising their full potential.
  • Many states did not match the central SEZ Act with State-level legislation, which rendered the single window system ineffective.
  • Lack of a robust policy design, efficient implementation and effective monitoring have seriously jeopardize India’s effort to industrialise through SEZs.

 

Source: THE HINDU.

Leave a Comment