Sez Benefits

By Author: Alice Coope
Total Articles: 213
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The government of India launched the Special Economic Zone (SEZ) scheme in 2000 with the aim of augmenting exports. They realized that in order to encourage foreign direct investment there is the need to provide a business atmosphere that is internationally competitive as well as hassle free. Hence, as part of the SEZ scheme enclaves were created within the nation, which were treated as foreign territories as most of the taxes, tariffs, and duties, that were applicable throughout the nation, were relaxed in special economic zones. The creation of SEZs put an end to the misery suffered by investors until then such as multiplicity of controls and clearances, absence of excellent infrastructure, and an unstable fiscal regime. It provided an amicable atmosphere for investors to carry out industrial, service and trade operations.

SEZ was actually part of the Foreign Trade Policy but in order to give it a long term and stable framework and to instill confidence in investors regarding the government’s commitment to SEZ, the SEZ Act was enacted in 2005. The SEZ Act covers all the important aspects required not only for setting ...
... up of SEZs but also for units operating in SEZs. Private developers, Central / State Governments, or both jointly can set up SEZ. As of June 2012, there are 143 operating special economic zones in India.

The SEZ Act provides a lot of benefits and incentives for those operating units in special economic zones. Let’s look at some of these SEZ benefits and incentives.

* 15 year corporate tax holiday on export profit – 100% for initial 5 years, 50% for the next 5 years and up to 50% for the balance 5 years equivalent to profits ploughed back for investment

* Permission to carry forward losses for 8 years, thus providing tax shelter on losses incurred in the initial years

* Customs duty exemption on import of capital goods, raw materials, consumables, and spares

* 100% foreign direct investment in manufacturing sector permitted

* Exemption from any duty of Excise on capital goods, raw materials, and consumable spares, etc. brought from the domestic market

* Exemption from Minimum Alternate Tax

* Exemption from Securities Transaction Act

* Exemption from Dividend Distribution Tax

* Exemption from Central Sales Tax (CST) on the sale or purchase of goods provided that the goods are meant to carry out the authorized operations

* Exemption from Service Tax

* Exemption of Capital gain on transfer of asset in case of shifting of Industrial Undertaking from Urban Area to SEZ

We would explore more of these benefits and incentives in the second part of this article.

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