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

News-CRUX-10     9th November 2023        
QEP Pocket Notes

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.
QEP Pocket Notes