What is Special Economic Zone (SEZ)/ Meaning of Special Economic Zone
Understanding about Special Economic Zone is crucial for comprehending the economic landscape of a country.
What is Special Economic Zone? It represents a significant approach to enhancing economic development.
The key question is, what is Special Economic Zone and how does it impact trade?
To further explore what is Special Economic Zone, we must consider its legal framework.
Another important aspect of what is Special Economic Zone is its role in global trade.
A special economic zone (SEZ) is an area in which the business and trade laws are different from the rest of the country. SEZs are located within a country’s national borders, and their aims include increasing trade balance, employment, increased investment, job creation and effective administration. To encourage businesses to set up in the zone, financial policies are introduced. Additionally, companies may be offered tax holidays, where upon establishing themselves in a zone, they are granted a period of lower taxation.
The creation of special economic zones by the host country may be motivated by the desire to attract foreign direct investment (FDI). The benefits a company gains by being in a special economic zone may mean that it can produce and trade goods at a lower price, aimed at being globally competitive.
Understanding the specifics of what is Special Economic Zone can aid in investment decisions.
Definition of Special Economic Zone under SEZ Act 2005
Those interested in economic policies should ask: what is Special Economic Zone?
As per Section 2 (za) of the SEZ Act 2005, Special Economic Zone means each Special Economic Zone notified under the proviso to sub-section (4) of section 3 and sub-section (1) of section 4 (including Free Trade and Warehousing Zone) and includes an existing Special Economic Zone.
The question of what is Special Economic Zone encompasses various definitions and interpretations.
In essence, what is Special Economic Zone is about fostering an environment for businesses to thrive.
As per Section 2(g) of the SEZ Act, “Developer” means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (10) of section 3 and includes an Authority and a Co-Developer;
As per Section 2(i) of the SEZ Act, “Domestic Tariff Area” means the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones;
As per Section 2(k) of the SEZ Act, Existing Special Economic Zone means every Special Economic Zone which is in existence on or before the commencement of this Act;
Definition of Special Economic Zone under GST Act
As per Section 2(19) of the IGST Act, Special Economic Zone shall have same meaning as assigned to it in clause (za) of Section 2 of the Special Economic Zones Act,2005.
As per Section 2(20) of the IGST Act, “Special Economic Zone developer” shall have the same meaning as assigned to it in clause (g) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005) and includes an Authority as defined in clause (d) and a Co-Developer as defined in clause (f) of section 2 of the said Act;
It is pertinent to refer clause (i) of Section 2 which defines that “Domestic Tariff Area” means the whole of India but does not include the areas of the Special Economic Zones. Supplies to special economic zones are “ZERO” rated as per the IGST Act, 2017. Zero rating means that the entire supply chain of a particular “ZERO –RATED supply” is free of GST.
Nevertheless, in the case of exempted supplies, output alone is exempted and GST is applicable on the input side. The main objective of the Special Economic Zone Scheme is generation of additional economic activity, promotion of exports of goods and services, promotion of investment from domestic and foreign sources, creation of employment opportunities along with the development of infrastructure facilities.
Many seek to understand what is Special Economic Zone to leverage its advantages.
As per Section 2(5) of the IGST Act, “export of goods” means with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India;
To truly grasp what is Special Economic Zone, one must consider the incentives provided.
As per Section 2(6) of the IGST Act, “export of services” means the supply of any service when, —
(i) the supplier of service is located in India;
Ultimately, understanding what is Special Economic Zone is key to navigating economic opportunities.
What is Special Economic Zone also relates to the broader context of international trade agreements.
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; 1[or in Indian rupees wherever permitted by the Reserve Bank of India]; and
(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;
Incentives and Facilities available to SEZ:
Some of the Incentives and facilities available to SEZ are:
- Exemption from customs/excise duties for development of SEZs for authorized operations approved by the Board of Approval.
- Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act.
- Exemption from Minimum Alternate Tax (MAT) u/s 115JB and from dividend distribution u/s 115O of the Income Tax Act.
- Exemption from GST Laws
Disclaimer
The content provided in this post is for general informational purposes only and does not constitute professional advice. While every effort is made to ensure the accuracy and reliability of the information, it may not reflect the most current legal or regulatory developments. Readers are advised to consult with a qualified professional or refer to official government resources for specific advice related to Goods and Services Tax (GST).
