SEZ - Special Economic Zone - What is it?

SEZ- Special Economic Zone: - What is it?


This is one term which has been frequently asked in various competitive exams.

So, let’s find out about the nuances of SEZ and a bit about its history.

SEZ is one word which never fails to appear in newspapers. A few months back, Tata group was planning to introduce a SEZ in Kolkata. SEZ means Special Economic Zone and is the one part of government’s policies in India. A SEZ is a geographical region in which the economic laws are more liberal than the usual economic laws in the country. The basic aim for SEZ is to increase foreign investment, development of infrastructure, job opportunities etc. This explanation might tell you the rough sketch of what a special economic zone is.

India was one of the first countries in Asia to adopt Export Processing Zone (EPZ) model to promote exports and Asia’s first EPZ was set up in Kandla in 1965. To overcome the shortcomings and limitations of EPZ, the SEZ policy was announced in the year 2000. This policy intended to promote the economic and industrial framework of India. The Special Economic Zone Act 2005 was passed by Parliament in May, 2005 and it came into effect on 10th February 2006. Now, lets find out about the objectives of SEZ act:

• Generation of additional economic activity

• Promotion of goods and services as well as investment

• Creation of employment

• Infrastructure development.

Now lets find out, how is a SEZ is developed and about the administrative process.

The developer submits the proposal for establishment of SEZ to the state govt. The state government has to forward the proposal within 45 days. The central government constitutes a board of proposal which takes the final decision on the proposal.

A SEZ enjoys various incentives and liberties provided by the government to promote trade and economic growth such as:-

• Duty free import or procurement of goods for development of SEZ area.

• 100% income tax exemption on export income for SEZ in first five years and 50% exemption afterwards.

• Exemption from central sales tax, service tax and many other nuanced taxes.

• Single window clearance for central and state approvals.

There are 5 SEZ which are notified by the central government in Mumbai, Noida, Cochin, Chennai and Falta (in West Bengal). And there are operational SEZs in 12 states of India which run under the state governments. SEZ is still one of the most important policies landmarks in terms of economic liberalization of the country.
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