The Author, Aman Meena, is a 2nd year BA.LLB. (Hons.) student of National University of Study and Research in Law (NUSRL), Ranchi. He is currently interning with LatestLaws.com.
Introduction of SEZ Act, 1955
Free zones and entrepôts have been used for centuries to guarantee free storage and exchange along trade routes. Modern SEZs appeared from the late-1950s in industrial countries. The first was in Shannon Airport in Clare, Ireland. From the 1970s onward, zones providing labor-intensive manufacturing have been established, starting in Latin America and East Asia. The first in China following the opening of China in 1979 by Deng Xiaoping was the Shenzhen Special Economic Zone, which encouraged foreign investment and simultaneously accelerated industrialization in this region. These zones attracted investment from multinational corporations. A recent trend has been for African countries to set up SEZs in partnership with China.
Q1. What is Special Economic Zones?
Ans. Special Economic Zones (SEZs.) are specifically delineated enclaves. They’re treated as foreign territory for the aim of commercial service and trade operations. The SEZs are given several relaxations of customs and other duties including anti dumping duty. These are more liberal regimes in respect of other levies, foreign investments and other transactions.
Q2.Which is that the first SEZ in India?
Ans. The first Export Processing Zone was founded in Kandla in 1965.SEZs in India Currently; about 240 are operational within the country. About 64% of the SEZs are located in five states – Tamil Nadu, Telangana, Karnataka, province and Maharashtra. The following table gives data about the SEZs as of February 2nd, 2020.
Q3.Is SEZ a taxpayer?
Ans. SEZs are treated as foreign territory for tax purposes although they're located within a country’s borders. Supplies into SEZs are exempt from paying GST because they're considered as exports. But, when an SEZ supplies goods/services to anyone, it'll be deemed an everyday inter-state supply and can attract IGST. However, when an SEZ supplies goods/services to a Domestic Tariff Area (DTA), it's exempt from paying taxes, although the receiver within the DTA should pay.
Q4 What is the SEZs Facilities & Incentives?
Ans. The government offers many incentives for companies and businesses established in SEZs. a number of the important ones are:
• Duty-free import or domestic procurement of products for developing, operating and maintaining SEZ units.
• 100% tax exemption on export income for SEZ units under the taxation 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 will become effective from 2020).
• Units are exempted from Minimum Alternate Tax (MAT).
• They were exempted from Central excise tax, Service Tax and State excise. These have now subsumed into GST and supplies to SEZs are zero-rated under the IGST Act, 2017.
• Single window clearance for Central and State level approvals.
• There isn't any need for a license for import.
Q5.The Salient Features of the SEZs Bill, 2005?
Ans. The following are the salient features of the Bill;
i) Matters regarding establishment of Special Economic Zone and for putting in of units therein, including requirements, obligations and entitlements;
ii) Matters regarding requirements for putting in of off-shore banking units and units in International Financial Service Center in Special Economic Zone, including fiscal regime governing the operation of such units
iii) Te fiscal regime for developers of Special Economic Zones and units founded therein;
iv) Single window clearance mechanism at the zone level
v) Establishment of an Authority for every Special Economic Zone founded by the Central Government to impart greater administrative autonomy
vi) Designation of special courts and single enforcement agency to confirm speedy trial and investigation of notified offences committed in Special Economic Zones…..”[11]
The Act received the assent of the President on 23rd June, 2005 and has acquire force with the Special Economic Zones Rules, 2006 on 10th February, 2006.
Q6.Challenges OF SEZ Act?
• Since SEZs offer a good range of incentives and tax benefits, it's believed that a lot of existing domestic firms may shift base to SEZs.
• There could be a fear that the promotion of SEZs is also at the value of fertile agricultural land affecting food security, loss of revenue to the exchequer and cause uneven growth with adverse effects.
• Apart from food security, water security is additionally affected thanks to the diversion of water use for SEZs.
• SEZs also cause pollution, especially with the discharge of untreated effluents. There has been huge destruction of mangroves in Gujarat affecting fisheries and dairy sectors.
• SEZs must be promoted but not at the price of the agricultural sector of the country. It should also not affect the environment adversely.
Q7. What incentives are provided to SEZ developer?
Ans. Following incentives are provided to SEZ developer:-
• Exemption from custom and excise duties for the event of SEZs
• Exemption from excise and repair Tax.
• Exemption from tax on income obtained by development of SEZs.
Q8. What are the requirements for Establishment of SEZ?
Ans. The central government is empowered to prescribe the necessities for establishment of a SEZ.
a) the minimum area of land and other terms and conditions subject to which the Board shall approve, modify or reject any proposal received by it under sub section (2) to (4) and
b) the terms and conditions subject to which the Developer shall undertake the authorized operations and his obligations and entitlements. The section contains a proviso. It provides that different minimum area of land and other terms and conditions stated clause (a) is also prescribed by the Central Government for a category or classes of SEZ.
Q9. What are the Duties of the Board?
Ans. Board to be called the ‘Board of Approval’ has been constituted to exercise the powers conferred on, and to perform the functions assigned thereto, under this Act. The Board of Approval shall have the duty to push and ensure orderly development of the Special Economic Zones. The Board, keeping in sight of the wants prescribed by the central government under Section 3 (8), may approve modify or reject a proposal as empowered under Section 3 (7).
If the Board approves the proposal with none modifications, it shall communicate to the central government.[48] If the Board approves the proposal with modifications it shall communicate such modifications to the person or the government concerned and if such modifications are accepted by such person or authorities the Board shall communicate the approval to the Central Government.
Q10. Details about Establishment of SEZ?
Ans. A Special Economic Zone is also established under this Act, either jointly or severally by the Central Government, authorities, or someone for manufacture of products or rendering services or for both or as a trade and Warehousing Zone. somebody, who intends to line up a Special Economic Zone, may, after identifying the realm, make a proposal to the authorities concerned for the aim of fixing the Special Economic Zone. The authorities may, on receipt of the proposal forward the identical along with its recommendations to the Board within such period as is also prescribed. The Board will further communicate its decision about approval/modifications/rejection to the Central Government.
Q11. What are the Duties, Powers and Functions of the Board?
Ans. The Board shall have the duty to market and ensure orderly development of the Special Economic Zones. It should be noted here that within a span of about 190 days after the SEZ Act came into force in February 2006 there was a mad rush and 388 proposals on a mean two per day reached the Union Industry and commerce Ministry. There being an incredible rush of entrepreneurs to line up SEZ, one amongst the observers raised a matter.” If SEZ developers spend huge sums on infrastructure and are unable to draw in enough export units, they're going to soon run into severe financial crisis. However, the Board is bestowed with the duty of orderly development of the SEZs within the country.
Q12. What is SEZ Authority?
Ans. Chapter VII deals with constitution of special Economic zone Authority, Officers of the Authority and other staff, Special provision for transfer of officers or other employees to the Authority and also the functions of the Authority, Grants and loans by Central government, constitution of Fund and its application, Accounts and Audit, directions by Central government, Returns and reports, power to supersede Authority, members officers and other employees of authority.
