What is SEZ Act, 2005?
Historical Background
Key Points
9 points- 1.
Provides for the establishment of SEZs by the Central Government, State Governments, or private developers.
- 2.
Offers a comprehensive package of incentives and exemptions to SEZ units and developers, including duty-free import/procurement of goods.
- 3.
Section 26 specifically grants exemption from customs duty on goods imported or procured from the Domestic Tariff Area (DTA) by an SEZ unit for its authorized operations.
- 4.
Establishes a Board of Approval for SEZs to approve proposals for setting up SEZs and units, ensuring a streamlined process.
- 5.
Provides for single window clearance for all approvals and clearances, reducing bureaucratic hurdles.
- 6.
Allows for 100% Foreign Direct Investment (FDI) in SEZs through the automatic route for most sectors.
- 7.
Exemption from various central and state taxes, duties, and levies (e.g., income tax, customs duty, excise duty, service tax, state sales tax) to enhance competitiveness.
- 8.
Ensures a stable policy regime for a period of 10 years for tax benefits.
- 9.
Defines the roles of the Development Commissioner, Approval Committee, and Board of Approval for effective administration.
Visual Insights
SEZ Act, 2005 vs. DESH Bill, 2022 (Proposed)
This comparison table highlights the key differences and proposed changes between the existing Special Economic Zones (SEZ) Act, 2005, and the proposed Development of Enterprise and Service Hubs (DESH) Bill, 2022. Understanding these distinctions is crucial for analyzing the future direction of India's industrial and trade policy.
| Aspect | SEZ Act, 2005 | DESH Bill, 2022 (Proposed) |
|---|---|---|
| Primary Objective | Promote exports, attract FDI, create employment. | Promote development of enterprise and service hubs, broader economic activity, domestic value addition, and employment. |
| Focus Area | Primarily goods manufacturing for exports. | Broader focus on both goods and services, including domestic market linkages. |
| Duty Benefits | Duty-free import/domestic procurement for authorized operations (Section 26). | Duty remission/equalization levy on domestic sales, aiming for WTO compliance. Focus on 'development hubs'. |
| Tax Benefits | 100% income tax exemption on export income for initial years. | No direct income tax exemptions. Focus on indirect tax benefits and ease of doing business. |
| WTO Compliance | Concerns raised regarding WTO compatibility (direct tax benefits). | Designed to be WTO-compliant by shifting from direct tax exemptions to indirect tax benefits/remissions. |
| Land Use | Underutilization of land and units, strict export obligation. | Flexible land use, allowing units to cater to both domestic and international markets. |
| Approval Mechanism | Board of Approval (BoA) for SEZs. | New unified development commissioner for ease of approval and operations. |
Recent Developments
3 developmentsThe government has proposed the Development of Enterprise and Service Hubs (DESH) Bill, 2022, to overhaul the SEZ framework, addressing issues like WTO compatibility and promoting domestic value addition.
Review of the existing SEZ policy to make it more attractive and aligned with current economic goals, such as 'Make in India' and 'Atmanirbhar Bharat'.
Efforts to integrate SEZs with broader industrial and infrastructure development plans to maximize their potential.