SEZ Scheme of India

A Special Economic Zone (SEZ) is a geographical region that is treated as deemed foreign territory. SEZs carry multiple incentives as compared to the remaining domestic tariff area (DTA), which makes them suitable for locating 100% exporting units. India has specific laws for its SEZ.

SEZ in India are spread all over the country and available in almost all major tire1 and tire2 Cities and IT Industry clusters. Tire1 Cities are Bangalore, Delhi-Noida-Gurgaon (Delhi National Capital Region), Chennai, Pune, Mumbai, and Hyderabad. Tire 2 Cities are Trivandrum, Kochi, Chandigarh, Jaipur, Gandhinagar, Coimbatore, Bhubaneshwar, Nagpur etc.

One can set up an  IT and BPO Offshore center or a manufacturing plant in an SEZ. Such production units set up in a SEZ are termed SEZ units. SEZ units can be set up in any Special Economic Zone (SEZ) established and notified by the Government of India.

There are both Government and private players developed SEZs with world-class infrastructure.

There are sector-specific SEZs also. Such as there are notified IT and ITeS (BPO) SEZs. A large number of Captive Offshore Centers of foreign companies as well as a lot of Indian IT companies have SEZ units operating under these Special Economic Zones specific to IT and ITeS.

Similarly, there are multi-sector SEZs also. Manufacturing operations can be set up in these SEZs. Also, IT and ITeS operations can be setup in multisector SEZs.

Also, a private company can set up a captive SEZ of its own or become a co-developer with an existing private SEZ.

Why set up in a SEZ after the Income Tax incentive sunset?

A business can set up a GCC or Global Delivery center or manufacturing operations to provide service in an SEZ to gain from the input side on import of both raw material and capital goods and save on easy GST regime in an SEZ as compared to normal operations outside SEZ.

It is especially useful for all kinds of GCCs and manufacturing operations that tend to focus primarily on manufacturing in India and exports from India to other destinations.

Tax Incentives and facilities offered to the SEZs

The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include:-

• • There is no income tax exemption available now.

• • 100% Duty-free import of capital goods for the authorised operation of SEZ unit

• • 100% GST exempted on domestic procurement of goods and services authorised operation of SEZ unit

• • 100% repatriation of profits after payment of dividend distribution tax

• • External commercial borrowing by SEZ units up to US $ 500 million in a year without any maturity restriction through recognized banking channels, allowing units to avail low interest rate borrowing at the international market rate.

• • Single window clearance for Central and State level approvals.

• • Exemption from State stamp duty in many State Governments.

• • Other incentives may be available from State Governments.