What is Special Economic Zone (SEZ)?
Historical Background
Key Points
8 points- 1.
Established under the SEZ Act, 2005 and SEZ Rules, 2006.
- 2.
Offers various incentives like duty-free import/domestic procurement of goods for development, operation, and maintenance of SEZ units.
- 3.
100% income tax exemption on export income for SEZ units for the first 5 years, 50% for the next 5 years, and 50% of ploughed back profits for the subsequent 5 years.
- 4.
Exemption from Minimum Alternate Tax (MAT), Central Sales Tax (CST), Service Tax, and State levies (prior to GST).
- 5.
Provides for a single window clearance mechanism for all approvals and clearances.
- 6.
Units can be set up for manufacturing, trading, or services.
- 7.
Goods and services entering SEZ from Domestic Tariff Area (DTA) are treated as exports, and those leaving SEZ for DTA are treated as imports.
- 8.
Allows for 100% Foreign Direct Investment (FDI) in SEZs through the automatic route for most sectors.
Visual Insights
Evolution of India's SEZ Policy Framework
This timeline traces the significant milestones in the development of India's Special Economic Zone (SEZ) policy, from its initial introduction to the latest legislative proposals and judicial clarifications. It highlights the government's evolving approach to promoting export-oriented growth.
India's SEZ policy has evolved from a simple export promotion scheme to a comprehensive legal framework, now undergoing reforms to address global trade norms and broaden its economic scope. The recent SC ruling reinforces the core principle of duty-free operations within SEZs.
- 2000India introduces its first SEZ policy under the Foreign Trade Policy, aiming to attract investment and boost exports.
- 2005SEZ Act, 2005 enacted, providing a comprehensive and stable legal framework for SEZs.
- 2006SEZ Rules, 2006 come into effect, detailing the operational guidelines and incentives for SEZ units and developers.
- 2022Government introduces the DESH (Development of Enterprise and Service Hubs) Bill to replace the SEZ Act, aiming for broader economic activity and WTO compliance.
- Jan 2026Supreme Court ruling clarifies duty-free status of inter-unit electricity transactions within SEZs, boosting investor confidence.
Special Economic Zones (SEZs): Objectives, Features & Impact
This mind map breaks down the core aspects of Special Economic Zones (SEZs), detailing their primary objectives, the key features and incentives they offer, their legal framework, and their overall impact on the economy. It highlights how SEZs aim to foster export-led growth and attract investment.
Special Economic Zone (SEZ)
- ●Objectives
- ●Key Features & Incentives
- ●Legal Framework
- ●Implications & Impact
Recent Developments
4 developmentsGovernment introduced the DESH (Development of Enterprise and Service Hubs) Bill in 2022 to replace the SEZ Act, aiming for broader economic activity and domestic market focus.
Challenges include underutilization of land and units, and competition from other export promotion schemes.
Focus on integrating SEZs with national infrastructure projects and promoting ease of doing business.
Review of the existing SEZ policy to make it more attractive and WTO-compliant.