Special Economic Zones – Ease, Exemptions and Enhanced Access for Entrepreneurs  

Last Updated at: July 11, 2020
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Special Economic Zones - Ease, Exemptions and Enhanced Access for Entrepreneurs
India is set to revamp the special economic zones (SEZs) framework to house a wider range of companies, allow flexible long-term leases and make exits easy to lure investment. Apart from this, non-processing areas in such enclaves can be used to boost exports and employment generation.

 

Business owners in India should know the different types of Special Economic Zones (SEZ) in the country. Notably, there both state-owned and central-owned SEZs. These provide the necessary training and support that the entrepreneurs need to make sure they witness better value, sales and customer reach. Most SEZs in the country are multi-product.

It is said that a business is a combination of a war and a sport. A Special Economic Zone or SEZ is like a huge sports centre, training and giving support to its entrepreneurs to fight the war of customers, sales and value better. A Special Economic Zone is an area actively dedicated to the promotion of business activities and is superior to any other location because of the facilities, services, and qualities it possesses.

Explore our legal help services to protect your intellectual property, secure funding from Venture Capitalists & comply with the many regulations of the MCA information and resources to help you through your end to end business requirement.

 

What kinds of Special Economic Zones are there in India?

India has both central and state-owned SEZs. Most Special Economic Zones in India are multi-product, which means they have facilities available for manufacturing, sale, export, and distribution of varied products and services. There also exist specific ones such as the SEEPZ Special Economic Zone in Mumbai which is specifically an electronic and gems and jewellery Special Economic Zone, or the Salt Lake Electronic City Special Economic Zone in West Bengal which is a Software Development and IT related Special Economic Zone.

Ask a Free Legal advice

Why should you consider setting up in a Special Economic Zone?

Ideal for export-oriented businesses – Every year the sales from units located in SEZ have brought increased profits in terms of the value of export. One of the reasons for this is their proximity to ports, good distribution channels including rail and airways. Additionally, there is a reduced burden for obtaining licenses for imports for such units. Moreover, if an export unit purchases inputs from outside the territory of the Special Economic Zone (which is not considered to be a part of domestic territory of India for certain purposes, despite being within the geographical terrain of India), that is from the domestic area, the purchase is eligible for deduction for tax purposes, bringing the overall manufacturing cost value downward.

  1. Exemption from Stamp Duty, registration fee and other procedural exemptions – For units located within the SEZ, there is exemption from payment of stamp duty and registration fee on purchase of land or industrial property. Moreover, there is no requirement of Indian domicile to be appointed as a director.
  1. Increased access to financial services – There are easier loans and a host of private and public funding available exclusively to units located in the Special Economic Zones.
  1. Tax holidays and exemptions – One of the most significant facets of being located in a Special Economic Zone is the tax advantage that early stage businesses can capitalise on. The deduction for export turnover is available for a maximum period of fifteen years. Entire 100 per cent of profits are exempt from tax liability for a period of five years. In the next five years, 50 per cent of the profits are exempt and in the last set of five years, a further 50 per cent of profits are exempt when debited to a special reserve for reinvestment. It is also noteworthy that even if you decide to sell the entire SEZ unit, the deduction will still be available to the buyer.
  1. Faster clearances – In line with India’s aim of boosting the Ease of Doing Business rankings, there is a single window clearance system for both setting up a SEZ as well as a unit within the SEZ.
  1. Providing technical, market and developmental support – There are niche Special Economic Zones such as those for the Software and Information Technology sector. In such specific zones, there is ample infrastructural support, such as great connectivity for call centres as part of Business Process Outsourcing. With better links to the market and boost to creativity and entrepreneurship extended by way of support from government as well as private funding units, setting up in a special economic zone could be one of the most strategically advantageous decisions for an upcoming venture.

While there are many Special Economic Zones (SEZs) in India, it is important for businesses involved in manufacturing, sales, distribution and export of products and services consider setting up in a SEZ. Doing so will provide benefits such as exemption from registration fee, stamp duty and other procedures, increased access to various financial services, faster clearances and more.

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Special Economic Zones – Ease, Exemptions and Enhanced Access for Entrepreneurs  

1031
India is set to revamp the special economic zones (SEZs) framework to house a wider range of companies, allow flexible long-term leases and make exits easy to lure investment. Apart from this, non-processing areas in such enclaves can be used to boost exports and employment generation.

 

Business owners in India should know the different types of Special Economic Zones (SEZ) in the country. Notably, there both state-owned and central-owned SEZs. These provide the necessary training and support that the entrepreneurs need to make sure they witness better value, sales and customer reach. Most SEZs in the country are multi-product.

It is said that a business is a combination of a war and a sport. A Special Economic Zone or SEZ is like a huge sports centre, training and giving support to its entrepreneurs to fight the war of customers, sales and value better. A Special Economic Zone is an area actively dedicated to the promotion of business activities and is superior to any other location because of the facilities, services, and qualities it possesses.

Explore our legal help services to protect your intellectual property, secure funding from Venture Capitalists & comply with the many regulations of the MCA information and resources to help you through your end to end business requirement.

 

What kinds of Special Economic Zones are there in India?

India has both central and state-owned SEZs. Most Special Economic Zones in India are multi-product, which means they have facilities available for manufacturing, sale, export, and distribution of varied products and services. There also exist specific ones such as the SEEPZ Special Economic Zone in Mumbai which is specifically an electronic and gems and jewellery Special Economic Zone, or the Salt Lake Electronic City Special Economic Zone in West Bengal which is a Software Development and IT related Special Economic Zone.

Ask a Free Legal advice

Why should you consider setting up in a Special Economic Zone?

Ideal for export-oriented businesses – Every year the sales from units located in SEZ have brought increased profits in terms of the value of export. One of the reasons for this is their proximity to ports, good distribution channels including rail and airways. Additionally, there is a reduced burden for obtaining licenses for imports for such units. Moreover, if an export unit purchases inputs from outside the territory of the Special Economic Zone (which is not considered to be a part of domestic territory of India for certain purposes, despite being within the geographical terrain of India), that is from the domestic area, the purchase is eligible for deduction for tax purposes, bringing the overall manufacturing cost value downward.

  1. Exemption from Stamp Duty, registration fee and other procedural exemptions – For units located within the SEZ, there is exemption from payment of stamp duty and registration fee on purchase of land or industrial property. Moreover, there is no requirement of Indian domicile to be appointed as a director.
  1. Increased access to financial services – There are easier loans and a host of private and public funding available exclusively to units located in the Special Economic Zones.
  1. Tax holidays and exemptions – One of the most significant facets of being located in a Special Economic Zone is the tax advantage that early stage businesses can capitalise on. The deduction for export turnover is available for a maximum period of fifteen years. Entire 100 per cent of profits are exempt from tax liability for a period of five years. In the next five years, 50 per cent of the profits are exempt and in the last set of five years, a further 50 per cent of profits are exempt when debited to a special reserve for reinvestment. It is also noteworthy that even if you decide to sell the entire SEZ unit, the deduction will still be available to the buyer.
  1. Faster clearances – In line with India’s aim of boosting the Ease of Doing Business rankings, there is a single window clearance system for both setting up a SEZ as well as a unit within the SEZ.
  1. Providing technical, market and developmental support – There are niche Special Economic Zones such as those for the Software and Information Technology sector. In such specific zones, there is ample infrastructural support, such as great connectivity for call centres as part of Business Process Outsourcing. With better links to the market and boost to creativity and entrepreneurship extended by way of support from government as well as private funding units, setting up in a special economic zone could be one of the most strategically advantageous decisions for an upcoming venture.

While there are many Special Economic Zones (SEZs) in India, it is important for businesses involved in manufacturing, sales, distribution and export of products and services consider setting up in a SEZ. Doing so will provide benefits such as exemption from registration fee, stamp duty and other procedures, increased access to various financial services, faster clearances and more.

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Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.