In the EXIM Policy 2000, Special Economic Zone (SEZ) is defined as "a specifically delineated, duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs."

1. Understanding Special Economic Zones
In the EXIM Policy 2000, Special Economic Zone (SEZ) is defined as "a specifically delineated, duty-free
enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and
tariffs." Special Economic Zones (SEZ) are certain geographical regions within a nation where the financial
and economic laws, which are applicable in other parts of the nation, are relaxed with the aim of encouraging
foreign direct investment in the respective country’ economy. Hence, these areas enjoy customs duty and tax
exemptions and a liberal atmosphere for foreign investment and transactions. Usually industrial, service and
trade operations are carried out in special economic zones. The following are the five main objectives of SEZ.
Encourage export of goods and services
Promote investment from domestic and foreign investors
Generate additional economic opportunities
Create employment opportunities
Develop infrastructure facilities
Special economic zones are of different types and it includes Free Trade Zones (FTZ), Export Processing Zones
(EPZ), Free Zones (FZ), Industrial Parks or Industrial Estates (IE), Free Ports, Urban Enterprise Zones, Technical
Zones or Innovational Zones, Industrial Zones or Developmental Zones and Tourist Zones.
Asia’s first Export Processing Zone (EPZ) was in India. It was set up in Kandla in 1965. Since then, many special
economic zones have been set up in different parts of India. As of June 2012, there are 143 operating special
economic zones in India and there are 634 SEZs formally or principally approved by the government of India.
Through SEZs, India has earned INR 3.16 Trillion in exports in 2010-11 fiscal. Moreover, as of 2010-11, SEZ
created more than 840,000 jobs.
The entrepreneurs developing units in SEZ benefits from
Exemption from Customs/excise duties
Exemption from Income Tax on income derived from the business of development of the SEZ in a
block of 10 years in 15 years
Exemption from Minimum Alternate Tax
Exemption from Dividend Distribution Tax
Exemption from Central Sales Tax (CST)
Exemption from Service Tax
In return, the developer is required to
Maintain proper (financial year wise) and accurate accounting records
Implement subcontracting with the permission of the specified officer
Achieve positive Net Foreign Exchange (NFE) earning cumulatively for a period of 5 years from the
start of production
Import goods and items only after receiving valid LOA
Submit annual performance reports to the Development Commissioner
Execute a bond cum legal undertaking with the Development Commissioner and Zone Customs
Comply with the environmental and pollution control rules
Abide by the wastage norms admissible under the Foreign Trade Policy
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