In this article, Nabin Singha pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses SEZ and its tax structure in Tamil Nadu.
A Special Economic Zone (SEZ) is a topographical area that is created to export merchandise and give business. SEZs are excluded from government laws with respect to taxes, quotas, FDI-bans, labour laws and other prohibitive laws so as to make the products fabricated in SEZ at an all around focused cost. The Category SEZ incorporates Free Zones (FZ), Free exchange Zones (FTZ), Industrial Parks (IP), Industrial Estates (IE), Export Processing Zones (EPZ), Free Ports, Free Economic Zones and Urban Enterprise Zones.
SEZ in Global Context
The term “Special” literally means privileged economic system and policies. The creation of the term special zone was made by Spain in 1929 with the expectation of enhancing the exports by value addition to the raw materials available in the country. Mr. Deng Xiaoping who made Chinese Economic marvel which has been proved in the last three decades. China has actualized SEZ arrangement in 1979, through which it opens the entryways of local market for western capital and technology. They chose the measuring scale for the accomplishment of economic liberalization policy is the pattern of SEZ in that economy. Subsequent to seeing the effective SEZ story of China, a few different nations likewise selected Chinese way, for example, UAE, Malaysia, Jordan, Poland, Kazakhstan, Philippines, Russia and South Korea. A large portion of the nations in South Asia, for example, Nepal, Bangladesh, Sri Lanka and Pakistan have attempted to advance their exports and furthermore make employment by setting up SEZs.
All the creating nations are focusing on export advancement as it assumes imperative part in economic development. A few measures are being adopted to enhance trade aggressiveness by the administration of the individual nations. In this specific circumstance, Export Processing Zones picks up its significance because of their catalytic role in advancing the export by granting outward introduction to the economies. In 1986, there were 176 zones crosswise over 47 nations which have been expanded to more than 3000 zones crosswise over 116 nations. By and by, there are more than 4000 zones crosswise over 130 nations.
SEZ in Indian Context
India likewise adopted the export advancement measures through Export Processing Zones (EPZ). Truth be told India is the first nation of Asia to have begun an EPZ in Kandla, in 1965. It was trailed by the Santacruz Export Processing Zone (SEPZ) which came into operation in 1973. Afterward, the Government of India (GOI) began five more EPZ amid 1980s in five unique states Uttar Pradesh, West Bengal, Kerala, Tamil Nadu and Andhra Pradesh in the accompanying urban communities Noida, Falta, Cochin, Madras and Visakhapatnam respectively. Another EPZ came into operation in Surat in 1998.
However, EPZs have confronted a few confinements and bureaucratic bottlenecks in the advancement of exports. With a view to conquer the deficiencies experienced by virtue of the variety of controls and clearances; absence of world-class infrastructure, and an unsteady financial administration and with a view to attract larger foreign investments in India, in April 2000, the Special Economic Zones (SEZs) Policy was announced. Based in this, the EXIM policy, The Government Of India (GOI) has propelled another plan of Special Economic Zones (SEZs) in 2000. Under this plan, the EPZs at four spots, Kandla, Santa Cruz, Cochin and Surat were changed over into SEZs. Going forward, in 2003, the other existing operational EPZs at Noida, Falta, Madras and Visakhapatnam were additionally changed over to SEZs. Notwithstanding that, endorsements has been surrendered to set 26 SEZs in different places in India, which include SEZs at Positra (Gujarat), Paradeep (Orissa), Nanguneri (Tamil Nadu), Kulpi (West Bengal), Bhadohi and Kanpur (Uttar Pradesh), Dornagiri (Maharastra), Kakinada (Andhra Pradesh) and Indore (Madhya Pradesh).
The policy proposed to make SEZs a motor for economic development bolstered by quality framework supplemented by an alluring monetary bundle, both at the Center and the State level, with the minimum possible regulations. SEZs in India worked from 1.11.2000 to 09.02.2006 under the rules of the Foreign Trade Policy and fiscal incentives were made viable through the rules of relevant statutes. To ingrain trust in speculators and flag the Government’s commitment to a stable SEZ strategy administration and with a view to give strength to the SEZ administration along these lines producing more prominent financial movement and employment through the foundation of SEZs, a far reaching draft SEZ Bill arranged after extensive discussions with the stakeholders. Lots of meetings were held in different parts of the nation both by the Minister for Commerce and Industry and additionally senior officials for this reason. In May, 2005 The Special Economic Zones Act, 2005, was passed by Parliament which got Presidential consent on the 23rd of June, 2005.The draft SEZ Rules were broadly talked about and put on the site of the Department of Commerce offering proposals/remarks. Around 800 proposals were gotten on the draft rules. After broad interviews, the SEZ Act, 2005, upheld by SEZ Rules, became effective on 10th February, 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments.
The principal destinations of the SEZ Act are:
- Generation of additional economic activity
- Advancement of exports of goods and services;
- Advancement of investment from domestic and foreign sources;
- Formation of employment opportunities;
- Improvement of infrastructure facilities;
- Maintenance of sovereignty and integrity of India, the security of the State and friendly relations with foreign states
Status of SEZ in Tamil Nadu
A Substantial development of export execution has seen the achievement of Tamilnadu Special Economic Zone (TSEZ). Tamilnadu Special Economic Zone refers the specified area within the territory of the state of Tamilnadu where the recommended standards and other customary administrative practices and limitations are not applicable. With the end goal of setting up of numerous Special Economic Zones (SEZs) in Tamilnadu, the state government has encouraged the SEZ Developer by means of exemption from federal laws, taxes, quotas, etc.
The government of Tamilnadu has expanded their assistance in setting up of SEZ so as to enhance the economic development, Industrial improvement and to create greater work openings. The Special Economic Zones helps in bringing the residential speculation as well as the outside venture which thusly enhance the framework, fast development in export, formation of greater work openings, giving world class items and expanded remote income. As the focal government open entryways for changed cross national speculation, the state government Tamilnadu has catalyzed the Foreign Direct Investment (FDI) for enhanced export execution. Tamilnadu has different SEZ in Chennai and Kanchipuram district and many other places where SEZs are being set up in the condition of Tamilnadu, are Coimbatore, Hosur, Tuticorin, Ennore, Thirunelveli, and Vandalur.
The Tamilnadu SEZs which are being set up in the state would suit organizations from different divisions, for example, Information innovation, Electronic Hardware, Pharmaceuticals, calfskin ventures, Engineering businesses, Textiles industry, nourishment preparing industry, Bio innovation, multiproduct, multi administrations, transport supplies, footwear industry and automobiles.
There are different motivations that the Tamilnadu government gives to TSEZ are that the SEZ is cleared through Single Window Clearance (SWC), the engineers of SEZ and the mechanical units with the SEZ are exempted from assessments, for example, Turnover Tax, Sales Tax and Value Added Tax (VAT). Notwithstanding that all the modern units in SEZ won’t need to pay enrollment charges and stamp obligation towards land Transaction. Further there are numerous different motivations given to TSEZ by the Tamilnadu state government are, the work principles will be rearranged for the SEZ, the legislature my give extra offices like Post Office, Police Station and Fire benefits yet the cost of such offices should be caused by the create of the SEZ and all the mechanical units that are situated inside the SEZ will be announced as Public Utility Services. The state power board guarantees the constant supply of energy to every one of the units inside the state, adequate supply of water and upkeep of lawfulness inside the SEZ.
Fiscal benefits to TSEZ
The monetary strategy concerning TSEZ refers that the administration has planned tenets and directions for SEZ that identifies with financial movement, pay circulation and asset allotment. The Tamilnadu government has embraced an effective and gainful policy for SEZ to upgrade the development of TSEZ in the state to go up. This is for the most part because of that SEZ brings more cash and business openings in the state which brings about monetary development and industrial improvement of the state.
The following support was given with a specific end goal to draw in more organizations to set up their units in the SEZ in the state.
- Import of goods for the purpose of operation, development and maintenance of the units in SEZ are duty-free.
- Exemption of 100% income tax on export income for the units that are within SEZ for the period of five years.
- 50% income tax exemption for next five years.
- Exemption from all other kinds of taxes – Sales tax, Excise duty, Customs duty, Mandi tax, Purchase tax and Electricity cess.
- All the units within the SEZ are exempted from paying the Minimum Alternate Tax (MAT).
- Industrial units in the SEZ can receive 100% Foreign Direct Investment (FDI).
- VAT and Sales Tax is applicable for the goods produced in SEZ when they are sold in local market.
The financial support gave by the State legislature of Tamilnadu has urged the designer to set up increasingly SEZ in the state. This has brought about the quantity of SEZ in the state, expanded in procures and limits in the most recent couple of years and numerous new SEZ has come up soon. It is important to proceed such amicable Fiscal arrangement by state government for the successful execution of SEZ keeping in mind the end goal to get positive Net Foreign Earnings (NFE). Thirty-three operational SEZ are there in Tamilnadu including Central government approved, Prior to SEZ Act and under SEZ policy 2006.
The present SEZ scenario proved that they are performing well. Therefore, both the central government and the state government have to continue the encouragement for more exports and constant support for the developer to reach the position of industrial sustainability in order to generate more employment opportunities.
The best improvement area of Indian Industries is Special Economic Zones (SEZ). The SEZ Policy was executed from 1.11.2000 to 9.2.2006 under the provisions of Foreign Trade Policy (FTP), gives monetary motivations through the provisions of SEZ Acts and Rules. The Indian SEZ arrangement means to make SEZs as a powerhouse and fare motors for financial development. These SEZ are upheld with world class framework alongside appealing financial motivating forces and tax rebates, both the union and the state level. The present SEZ situation proved that they are performing admirably. In this way, both the central government and the state government need to proceed with the consolation for more fares and steady support for the engineer to achieve the position of modern manageability keeping in mind the end goal to produce greater work openings.