Understanding the Benefits and Incentives of SEZ Scheme
The SEZ Scheme has been introduced with the motive to enhance manufacturing, trading, and other activities related to the import-export business. It was established to encourage more foreign trade business and offer exporters a very competitive and hassle-free trade environment.
The SEZ scheme was introduced in April 2000. Its major goal was to offer support to Indian exporters to compete on the global level. SEZ refers to the Special Economic Zone. These zones are special geographical regions that are considered to be duty-free enclaves. These duty-free enclaves usually have economic laws that are different from the other parts of the country.
The Special Economic Zones, commonly known as SEZs often attract various big brands and companies as these zones have a lot of infrastructural benefits that they can utilize for their profit.
A lot of countries around the globe have implemented the Special Economic Zone (SEZ) policy. It includes China, Poland, Russia, and the Philippines.
SEZ Scheme Benefits in India
India introduced the SEZ Act in 2005 and its rules & regulations came into existence on 10th February 2006.
In India, Special Economic Zones have been established with the motive to promote more economic development in the country. The major motive behind the introduction of SEZs in India was to promote more export of Indian goods in foreign markets. It also focused on encouraging more foreign and domestic investments in Indian exporters.
Here are some of the major benefits provided by the SEZ Scheme.
More employment opportunities
Do you know what is the biggest benefit of having Special Economic Zones (SEZ) in India? It is creating a wide range of employment opportunities and infrastructure development.
Now let us talk about another major benefit that the SEZ scheme provides us. It is the tax incentives for businesses established in such zones and developing their overall infrastructure. The SEZ scheme enhances more and more foreign exchange by increasing Indian exports and providing new employment opportunities in the country’s import-export industry.
Releasing the overall export value
The SEZ units in our country are provided permission to release and repatriate the overall export value of goods and services within a year starting from the initial date of export. Moreover, the Indian government has also exempted the Special Economic Zones (SEZ) from paying stamp duty fees and registration amounts on the license of plots.
Features of SEZ policy in India
Let us now discuss the features of SEZ policy in India. We already know that the major motive behind the introduction of SEZ in India was to promote more foreign exchange and create a hassle-free trade environment for Indian exporters.
With the new Foreign Trade Policy 2023 putting a major highlight on the Special Economic Zone scheme, these regions have been developed with the best-class infrastructure such as well-built roadways, storage facilities, best manufacturing units, etc. It is done so that more and more foreign investors get attracted indirectly contributing a key amount to the economic development of the country.
The features of the Special Economic Zones scheme in India are:
- Businesses that have been established in SEZs are to be provided with various incentives including free electricity, free water supply, subsidy on land prices, and many more.
- The special economic zones are considered to be duty-free industrial parks as suggested by the Indian government. These regions are to be treated as foreign territories for business procedures, duties, and tariffs.
- These special regions do not require any type of licence for imports and businesses. They also enjoy exemption from customs duty while importing capital goods, raw materials, consumable goods, and many more
- The SEZs are exempted from paying the sales tax and service tax on the sale or purchase of any type of goods or services.
- Another interesting feature of these SEZs is that any supply of goods or services to these special units is considered to be a zero-rated supply. In other words, supplies into SEZs do not require paying the Goods and Services Tax (GST). Moreover, these goods are counted as exports.
- The important special economic zone features include employer-friendly labor laws. For example, since SEZ units are considered ‘public utility services’, no strikes are allowed in such companies without giving the employer notice at least six weeks before. Also, there are the other conditions mentioned in the Industrial Disputes Act, of 1947 included along with it.
In our country, most of the Special Economic Zones (SEZ) are formed with the mutual agreement of the state and central government. But, nowadays even the public or private sector can set up these SEZs. The role of the Government in such cases would be to approve the proposal.
The SEZ scheme is considered to be a very important initiative by the Indian government to promote foreign investment in the industrial activities of the country. The SEZ policy in India has shown tremendous growth in infrastructure investment, employment, and exports since its introduction and it is likely to be highly beneficial for India in the coming years.