SSB Interview Question: What is a SEZ? Why was it in news recently?
Answer: Sir, a Special Economic Zone (SEZ) is a dedicated zone wherein businesses enjoy simpler tax and easier legal compliances.
The SEZ Rules provide for different minimum land requirement for different class of SEZs. Every SEZ is divided into a processing area where alone the SEZ units would come up and the non-processing area where the supporting infrastructure is to be created. There are 373 notified SEZ’s in India including 7 SEZ’s of the Central Govt. and 12 owned by State/private. However, only 213 are operational wherein more than 5250 units are functional which provide direct employment to more than 22 lakh people.
Sir, the SEZ’s were in news recently amidst the lockdown imposed to contain the spread of Covid-19 in India. The government allowed manufacturing and industrial establishments in SEZs and Export Oriented Units (EOUs), industrial estates and industrial townships to resume operations from 20th April 2020.
The government allowed companies and units located in access controlled SEZs, Export Oriented Units (EOUs), industrial townships to resume work, provided they maintain social distancing norms, arrange transport and a place for workers to stay within the township.
Note: Please read details which one must know. If the interviewer seeks more depth in your knowledge on SEZ then you will need this information.
The main objectives of the SEZ are:
- generation of additional economic activity
- promotion of exports of goods and services
- promotion of investment from domestic and foreign sources
- creation of employment opportunities
- development of infrastructure facilities
Advantages to set up business in SEZ in India are as follows: -
- Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units
- 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years. (Sunset Clause for Units will become effective from 01.04.2020)
- Exemption from Minimum Alternate Tax (MAT) under section 115JB of the Income Tax Act. (withdrawn w.e.f. 1.4.2012)
- Exemption from Central Sales Tax, Exemption from Service Tax and Exemption from State sales tax. These have now subsumed into GST and supplies to SEZs are zero rated under IGST Act, 2017. However, the customers must pay the GST on goods & Services supplied by units in SEZ.
- Other levies as imposed by the respective State Governments.
- Single window clearance for Central and State level approvals.