SEZS IN INDIA (Syllabus: GS Paper 3 – Economy)

Context: The proposed amendments to the SEZ Act, 2005, indicate that the Centre may not introduce new direct tax incentives for SEZ units but may recently consider grandfathering previous exemptions.

• Under DESH Bill, the commerce department had previously suggested a concessional corporate tax rate of 15 per cent for all greenfield units in SEZs, intending to establish these zones as India’s new manufacturing hub.

DESH Bill

• SEZ Framework: The plan entails a comprehensive reform of the existing Special Economic Zone (SEZ) law of 2005.
• Objective: To rekindle interest in SEZs and create more inclusive economic hubs.
• Renaming and Expanding SEZs: SEZs are set to be rebranded as "Development Hubs."
• These hubs will enjoy freedom from various current restrictions.
• They will serve as platforms for both export-oriented and domestic investments, assuming a dual role as domestic tariff areas and SEZs.

SEZs in India

• EPZ Concept in Asia (1965): Asia's inaugural Export Processing Zone (EPZ) was established in 1965 in Kandla, Gujarat.
• Transition to SEZs (2000): In 2000, the Indian government initiated the establishment of Special Economic Zones (SEZs) to address the limitations of EPZs.
• Enacting the SEZ Legislation (2005-2006): The Special Economic Zones Act was enacted in 2005, and it came into effect alongside the SEZ Rules in 2006, drawing inspiration from China's successful model.
• Current Landscape of SEZs in India: Presently, India boasts 379 officially designated SEZs, with 265 of them being operational. The states of Tamil Nadu, Telangana, Karnataka, Andhra Pradesh, and Maharashtra collectively account for 64% of these SEZs.
• Oversight by the Board of Approval: The Board of Approval, led by the Secretary of the Department of Commerce under the Ministry of Commerce and Industry, serves as the highest governing body for SEZs in India.