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Op 15 year corporate tax holiday on export profit ± 100% for initial 5 years, 50% for the next 5 years

and up to 50% for the balance 5 years equivalent to profits ploughed back for investment.
Op cllowed to carry forward losses.

Op mo license required for import made under SEZ units.

Op ‘uty free import or domestic procurement of goods for setting up of the SEZ units.

Op oods imported/procured locally are duty free and could be utilized over the approval period of 5

years.
Op Exemption from customs duty on import of capital goods, raw materials, consumables, spares,

etc.
Op Exemption from Central Excise duty on the procurement of capital goods, raw materials, and
consumable spares, etc. from the domestic market.
Op Exemption from payment of Central Sales Tax on the sale or purchase of goods, provided that,

the goods are meant for undertaking authorized operations.


Op Exemption from payment of Service Tax.

Op The sale of goods or merchandise that is manufactured outside the SEZ (i.e., in ‘Tc and which
is purchased by the Unit (situated in the SEZ is eligible for deduction and such sale would be
deemed to be exports.
Op The SEZ unit is permitted to realize and repatriate to India the full export value of goods or
software within a period of twelve months from the date of export.
Op £ rite-off´ of unrealized export bills is permitted up to an annual limit of 5% of their average
annual realization.
Op mo routine examination by Customs officials of export and import cargo.

Op Setting up Off-shore Banking Units (OBU allowed in SEZs.

Op OBU's allowed 100% income tax exemption on profit earned for three years and 50 % for next

two years.
Op Exemption from requirement of domicile in India for 12 months prior to appointment as ‘irector.
Op Since SEZ units are considered as µpublic utility services¶, no strikes would be allowed in such

companies without giving the employer 6 weeks prior notice in addition to the other conditions
mentioned in the Industrial ‘isputes cct, 1947.
Op The overnment has exempted SEZ Units from the payment of stamp duty and registration fees
on the lease/license of plots.
Op External Commercial Borrowings up to $ 500 million a year allowed without any maturity
restrictions.
Op Enhanced limit of Rs. 2.40 Crores per annum allowed for managerial remuneration.

The key projections for the financial year 2007 - 2008 are as follows -

Op Arojected exports from all SEZs for 2007-08 is Rs.67300 crore


Op Aresently, 1016 units are in operation and providing direct employment to over 1.79 lakh people
of which around 40% are women
Op Arivate investment by entrepreneurs before the SEZ cct was around Rs.4400 crore. In the 63

notified SEZs which have come up after 10th February 06, investment of Rs.13, 435 crore has
already been made in less than a year
Op †ave created direct employment for around 18, 457 people


 

Op Revenue losses because of the various tax exemptions and incentives.


Op any traders are interested in SEZ, so that they can acquire at cheap rates and create a land bank
for themselves.
Op The number of units applying for setting up EOU's is not commensurate to the number of
applications for setting up SEZ's leading to a belief that this project may not match up to
expectations.

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SEZ has been one of the key reasons for the huge F‘I that China has managed to attract so far.
The concept of SEZ is fundamental model of China F‘I model, where it developed SEZ on a
focused manner. This is to be remembered that, this did not happen overnight and it has taken 25
years for China to become what it is today.

The incentives offered in Indian SEZs are in no less than those in China. From duty-free imports
and tax holidays to freedom from cumbersome Custom procedures, the SEZs' facilities match
those in China.

†ence, theoretically at least, India's SEZs should be no less attractive to foreign investors as the
Chinese versions. But reality paints a different picture.

Conceptually, EAZs and SEZs are different ² while the former is an industrial estate, the latter
is an industrial township. The scopes of SEZs are much wider and their linkages with the
domestic economy stronger. †ence, merely switching from EAZs to SEZs, without undertaking
the required structural changes, do not guarantee success.

This is to be remembered that, China¶s resounding success with the SEZ model of economic
development, did not happen overnight and it has taken 25 years for China to become what it is
today.

There are five SEZs in China. Of these, four ² Shenzhen, Xiamen, Shantou and Zhuhai ² were
founded 20 years back and the fifth, †ainan, was set up in 1988.

Following are some of the reasons of China success with SEZ.

(a pEach SEZ is well over 1,000 hectares, the minimum recommended area. In India, the EAZs
converted into SEZs are not even a third of this.
(b p 
 ù In China, about 50 per cent of SEZ sales are to the domestic market.
Though India has a large domestic market, it has failed to project this to lure SEZ investors. The
reasonù Aolicy impediments to sales in the domestic market. hile in China the thrust of SEZs
has been to attract foreign investments and modern technology, in India the emphasis has been
on exports.

In 2001, the share of the five SEZs in the country's total exports was 10.4 per cent. In contrast,
the of Indian SEZs in 2001-02 was a little over 4 per cent of the total exports.

(c p      !In China. Arovincial and local authorities were made partners and
stakeholders, by delegating to them powers to approve foreign investment.
The SEZ authorities in China can approve foreign investment proposals up to $30 million. In
India, only State governments are allowed to set up SEZs and the powers for foreign investment
approvals are vested with the ‘evelopment Commissioners, who are the representatives of the
Central overnment.

(d po"#$ #%$ !The hire-and-fire policy in SEZs has been one of the biggest attractions
for foreign investors in China. The new labour law consists of 107 articles, but none of these is
more than one paragraph.

cll jobs are on labour contract basis, which stand terminated upon the expiry of the terms, which
can be fixed/flexible or for a specific job. In contrast, the labour policy in India is worker, rather
than investment, oriented.

Other features which have contributed to the success of SEZs in Chinaù Unique location,
investment friendly attitudes towards non-resident Chinese, attractive incentive packages, liberal
Custom procedures.
In sum, the fundamental objectives for setting up SEZs and their role in the national economy are
different in the two countries. The impending need is buoyancy in foreign investments, which
would automatically catapult exports.

Thus it is to be remembered that, China¶s resounding success with the SEZ model of economic
development, did not happen overnight and it has taken 25 years for China to become what it is
today.


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