INTERNAL RESEARCH ASSIGNMENT

Name of the candidate:

RICHA BANSAL

Enrollment no. :

08215903911

Course:

MBA-III-A

Batch:

2011-2013

Subject:

EXIM

Subject code:

MS- 243

Topic of assignment:

SPECIAL ECONOMIC ZONE

Subject Teachers name:

Dr. A. Lenin Jothi

SPECIAL ECONOMIC ZONES (SEZs)

Special Economic Zone was convinced by the Commerce and Industries Minister Murasoli during a visit to Special economic Zone in China in 1999. The scheme was announced at the time of annual review of EXIM Policy effective from 1.4.2000. The basic idea behind establishing these zones is to reserve areas where exports production could take place free from all rules and regulations governing imports and exports and to give them operational flexibility. SEZs is a specifically delineated duty free enclave, which shall be deemed to be territory for the purposes of trade operations and duties and tariffs. The policy provides for setting up of SEZs in the public, private, joint sector or by State Governments. It was also envisaged that some of the existing Export Processing Zones would be converted into SEZs. Accordingly, the Government has converted Export Processing Zones located at Kandla and Surat (Gujrat), Cochin (Kerela), Santa Cruz (Mumbai), Falta (West Bengal), Madras (Tamil Nadu), Visakhapatnam (Andhra Pradesh) and Noida (U.P) into a SEZ. A Special Economic Zone (SEZ) is a geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws. "Nationwide" laws may be suspended inside a special economic zone. The category SEZ covers, including free trade zones (FTZ), export processing Zones (EPZ), free Zones (FZ), industrial parks or industrial estates (IE), free ports, free economic zones, urban enterprise zones and others. Usually the goal of a structure is to increase foreign direct investment by foreign investors, typically an international business or a multinational corporation (MNC), development

of infrastructure and to increase the employment.

FEATURES OF SEZ

a) Establishment of SEZ:
A SEZ may be established under this Act, either jointly or severally by the Central Government, State Government, or any person for manufacture of goods or rendering services or both or as a Free Trade and Warehousing Zone. Any person, who intends to set up a SEZ, may, after identifying the area, make a proposal to the State Government concerned for the purpose of setting up the SEZ.

b) Export & Import:

Goods and services going into the SEZ area from DTA shall be treated as deemed exports and the domestic suppliers are eligible for deemed export benefits. Similarly, goods and services coming from the SEZ area into DTA shall be treated as if the goods are being imported. The entire production of SEZs units must be exported and DTA sales are permitted only on the payment of full applicable custom duties.

c) Activities Permissible:
SEZ units may be set-up for manufacture of goods and rendering of services, production, processing, assembling, trading, repair, remaking, reconditioning, re-engineering including making of gold, silver, platinum jewellery and articles thereof. Units for generation and distribution of power may also be permitted.

d) Foreign Direct Investment:

FDI upto 100% is allowed through automatic route for all manufacturing activities except: Arms and ammunition and other items of defence; Narcotic and psychotropic substances; Hazardous chemicals; Distillation and brewing of alcoholic drinks, and Cigarettes and tobacco.

Promotional Package for SEZ

a. Exemption from Central Excise Duty on procurement of capital goods, raw materials, and consumable spares, etc., from the domestic market. b. 100% income tax exemption for a block of five years, 50% tax exemption for two years and upto 50% of the profits are ploughed back for next three years under Section 10-A of Income Tax Act. c. 100% tax exemption for three years and 50% for two years under Section 80-LA of the Income Tax Act for off-shore banking units. d. Support services like banking, post office clearing agents, etc., provided in Zone Complex. e. No license required for import. Exemption from customs duty on import of capital goods, raw materials, consumable, spares etc. f. SEZ units can retain 100% of their exports proceeds in Exchange Earners Foreign Currency (EEFC) account. g. Realization of exports proceeds extended to 12 months from the date of export. h. Reimbursement of Central Sales Tax paid on domestic purchases. i. State Trading Enterprises Policy will not apply to SEZ manufacturing units. j. Exemption from the payment of service tax.

ADVANTAGES OF SEZ

A SEZ unit which has been set up for carrying on manufacturing, trading or service activity has both advantages as well as disadvantages. SEZ advantages are quite far more as compared to its disadvantages which are almost negligible. 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. Allowed to carry forward losses. No licence required for import made under SEZ units. Duty free import or domestic procurement of goods for setting up of the SEZ units. Goods imported/procured locally are duty free and could be utilized over the approval period of 5 years. Exemption from customs duty on import of capital goods, raw materials, consumables, spares, etc. Exemption from Central Excise duty on the procurement of capital goods, raw materials, and consumable spares, etc. from the domestic market. Exemption from payment of Central Sales Tax on the sale or purchase of goods, provided that, the goods are meant for undertaking authorized operations. Exemption from payment of Service Tax. The sale of goods or merchandise that is manufactured outside the SEZ (i.e, in DTA) and which is purchased by the Unit (situated in the SEZ) is eligible for deduction and such sale would be deemed to be exports. The SEZ unit is permitted to realize and repatriate to India the full export value of goods or software within a period of twelve months from the date of export. Write-off of unrealized export bills is permitted up to an annual limit of 5% of their average annual realization.
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No routine examination by Customs officials of export and import cargo.

Setting up Off-shore Banking Units (OBU) allowed in SEZs. OBU's allowed 100% income tax exemption on profit earned for three years and 50 % for next two years. Exemption from requirement of domicile in India for 12 months prior to appointment as Director. Since SEZ units are considered as public utility services, no strikes would be allowed in such companies without giving the employer 6 weeks prior notice in addition to the other conditions mentioned in the Industrial Disputes Act, 1947.

The Government has exempted SEZ Units from the payment of stamp duty and registration fees on the lease/license of plots. External Commercial Borrowings up to $ 500 million a year allowed without any maturity restrictions. Enhanced limit of Rs. 2.40 crores per annum allowed for managerial remuneration.

BIBLIOGRAPHY
Jain, S. Khushpat, Export Import Procedures and Documentation, Himalaya Publishing House.

http://www.eximguru.com/exim/special_economic_zone_sez/ch_4_advantages_disadvant
ages_sez.aspx