Benefits and Incentives under SEZ Scheme

Fiscal Benefits to the Developer
a. Income Tax Incentives

• 100% tax deduction for ten years out of 15 years beginning with the year in which the SEZ is notified by the government

b. Indirect Tax Incentives

• Exemption from customs duty on import of capital goods/raw material into the SEZ for authorized operations;
• Exemption from excise duty on local procurement of capital goods/raw materials;
• Exemption from CST on inter-state purchases subject to submission of statutory declaration Form I;
• Exemption from payment of service tax on the input services wholly consumed in the SEZ unit for authorized operations and refund mechanism for service tax paid wholly or partially consumed outside the SEZ for authorized operations. In addition, goods sold from DTA units to the SEZ unit would attain the status of physical exports. In light of this, the sale of goods to a SEZ unit will be regarded as exports and the DTA unit will be eligible for export benefits as admissible under the FTP;
• Exemption from ADC in lieu of sales tax/VAT on goods manufactured within the SEZ unit and sold to Domestic Tariff Area (DTA);
• Exemption from VAT as per VAT legislation;
• Exemption from payment of stamp duty as per state government policy

FDI Policy
100% FDI is permitted under the automatic route for SEZ development. For units in SEZs, the FDI Policy of the Government of India will apply.

No minimum export obligation

• SEZ units to be net foreign exchange earners at the end of five years calculated cumulatively;
• No limit on DTA sales provided full import duty is paid;
• Supply of IT hardware and software and telecom equipment to domestic markets, as well as supply of goods and services to other SEZ/EOU/STPI units are counted towards calculation of foreign exchange earnings.

Fiscal benefits to a SEZ Unit

• 15 year income-tax deduction on export profits beginning with the year in which the unit begins to manufacture, produce or provide services – 100% for the initial five years, 50% for the next five years and up to 50% for the remaining five years, equivalent to profits ploughed back for re-investment;
• Tax deduction only for physical export;
• Exemption from MAT;
• Same indirect tax benefits as the SEZ Developer;
• Exemption from electricity duty;
• Exemption from payment of stamp duty as per state government policy.

Liberal Exchange Controls

• 100% export earnings maintainable in foreign exchange in Special Foreign Currency
• Account – minimal restrictions on business payments outside India;
• Unlimited credit period for export realization;
• Branches of foreign companies in SEZ are eligible to undertake manufacturing activities.

Offshore Banking Units

An Offshore Banking Unit is a branch of a bank in India located in the SEZ with the permission of RBI. Offshore Banking Units provide cheaper finance at international rates to Units in SEZs. Banks setting up Offshore Banking Units in SEZs are entitled to tax deduction (beginning with the year in which they obtain requisite approvals) of 100% for the first five years and 50% for the next five years. A similar deduction is available to units of an International Financial Services Centre.